One Word: Plastics
Just as consumers have benefited from sliding oil prices, so too have many companies, including those in the transportation sector. Below you can see that near the start of September, the oil and gas industry decoupled from the transportation sector, composed of airline, trucking, delivery services, railroad and marine transportation companies. Currently there’s more than a 35-point spread between the Dow Jones Transportation Average and SPDR S&P Oil & Gas Exploration & Production ETF.
Manufacturers of plastics and synthetic rubber, of which crude is the main component, have also benefited. The U.S. producer price of plastics and rubber products is up $1.20 year-to-date. In 30 days, Cooper Tire & Rubber has shot up 13%, Berry Plastics 14%, Goodyear 15%.
Shell, on the other hand, has given back 5%.
This is precisely why we’re attracted to low-cost oil producers such as EOG Resources and Devon Energy. Many, but not all, of them are nimbler and more adaptable in uncertain economic climates than the big names are. We strive to buy only those that have been well screened and fit our models.