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Price at the Pump

Posted by kdadmin on January 14th, 2015.

Have you noticed that the gas price at the pump is significantly lower than it was just a few months ago? Right. It’s actually down about $0.92 per gallon from its high on July 31, 2014. That’s nearly 24%.

Now, what does simple math tell you? IF, the USA used about the same 134.51 billion gallons it did in 2013 (Source: EIA), how much could a cost reduction of $0.92 per gallon save the USA gasoline consumers? Right. $123.75 BILLION.

Now for the obvious part. IF the energy sector represents about 9% of the S&P 500, and IF the energy sector is already down about 23% since July 31, 2014 (represented by the ETF XLE), due to a roughly 55% drop in oil prices, what’s going to happen to that $123.75 billion in potential gasoline consumer savings? Since it’s not going into the oil company’s pockets, doesn’t it make sense that maybe, just maybe, a significant portion of it could go into the coffers of the OTHER 91% of companies in the S&P500?

Sometimes seeing is believing; if so, take a gander at the following chart, or at my other Global Markets posts.

Price at the Pump

So, what have you got if you couple the lowest unemployment rate we’ve seen in years (more income) with oil cost savings of $123.75 billion burning a hole in the pocket of gasoline consumers (lower prices), add in ultra low federal lending rates (cheap interest costs), strong corporate balance sheets (opportunity for capital investment), the smallest USA budget deficit since 2007 (strong government), AND one of the more stable economies (USA) on the globe?

At the bare minimum, you’ve got no reason to panic about oil prices or January market volatility.


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