Oil Prices Skyrocket! | Why & What Does It Mean For The Stock Market!
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Oil prices spiked Monday after a devastating attack on Saudi Arabian oil production over the weekend shocked markets and could disrupt the global supply of crude for some time.US oil futures jumped 14.7%, settling at $62.90 a barrel. It was the biggest spike since January 2009. Futures of Brent crude, the global benchmark, settled up 14.6% at $69.02 a barrel.
Gasoline futures, meanwhile, were up more than 13%, which isn’t boding well for American drivers.
Prices initially surged as much as 18% but retreated after US President Donald Trump said on Sunday night that he had authorized the use of oil from the country’s emergency oil supply. Trump said oil from the Strategic Petroleum Reserve, or SPR, would be used “to keep the markets well-supplied.” The US reserve is the largest backup pool of oil.
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But for right now, for right now, it absolutely matters in a huge way. Well, Holy smoke is cowboys and cowgirls looks like we need to move way up to North Dakota and get drilling some oil because oil prices just had their most insane day in 10 years. Yes, you heard me right, the oil price went up the most in 10 years here today, so much has transpired over the last 40 hours.
Let’s just start getting into this I want to explain what this means for the stock market. What this means for stock earnings, everything across the board, make sure you smash the thumbs up button. Let’s start getting to this guys. So first off, it is known that I ran likely attacked a Saudi oil infrastructure, okay.
And this was not just some kind of like small infrastructure project or something like that. Like this is monumental. Okay. This is a monumental, huge Saudi infrastructure, very important stuff. You know, what, whoever attacked who is kind of irrelevant to us, just the fact is, we have to deal with this Saudi oil infrastructure was attacked in a big, big way.
Okay, what is this go ahead mean? Well, basically, the Saudis are going to have to cut their oil production by about 50% for the time being, okay, Saudi Arabia, and they are a huge for like the supply and demand of oil. And so if supply is cut by that much 50%.
Needless to say, this is going to cause ripple effects for the entire world when it comes to oil and oil prices. Okay, so 50% cut for the time being there. Okay. So what does this lead to this, they said that this is going to take weeks to fix.
So this isn’t something that they’re just going to be able to fix this infrastructure in a few days time or something like that. They’re saying it’s going to take at least several weeks to fix this infrastructure up. Okay. Basically, it was a drone attack, you probably seen some of the pictures, I had some of the pictures on the thumbnail, and definitely not a good luck.
Okay, this causes, obviously, a supply and demand in balance, supply. And demand is very key in any commodity, especially oil. And when you talk about a 50% cut from one of the biggest producers, if not the biggest producer in the world, on this particular commodity, which is oil.
Needless to say, that’s going to cause a supply and demand imbalance because everybody’s going to be using just as much oil as they have previously. Right? It’s not like just because oh, we have a 50% cut from a big, you know, oil producer that everybody’s like, oh, let me stop using like, 50% as much oil No, everybody’s going to use just as much.
Okay, every company, every person in general is going to go fill up their car just as much with gasoline and everything. Okay, so this causes a supply and demand imbalance. But what it causes even more of Okay, even more than a supply and demand imbalance is mainly it causes worries from investors and folks out there that this could happen again, what if more infrastructure got hit in Saudi Arabia?
What if this happens again? What if they fix this infrastructure? And then another drone attack comes from someone like Iran? What does that mean for the oil prices? Long term? We know the stock market doesn’t like uncertainty in the stock market has a lot of anxiety around like, what could happen, what might happen?
And when you have something like this happen, the stock market gets a little freaked out in the commodities market gets a little freaked down. They’re like, Oh, my gosh, could this happen again? And you know, it’s just that like anxiety that goes on the stock market all the time, when something like this happens, it causes worries, what if this happens again?
And what does this go ahead and do? Well, prices jumped between 13%. And as much as 18% here today, which is pretty unprecedented. This stuff doesn’t just happen, like the price of oil doesn’t just increase or decrease 13 to 18%. In a given day, I think it finished up something like 14%. And that is absolutely ridiculous.
Okay, this was the biggest jump in a decade, okay. Like I said, this stuff doesn’t just happen, like oil prices, don’t just jump like double digit percentages, like all the time, okay, this is the biggest jump in literally a decade. Okay? So one thing this is going to lead to, it’s going to lead to a little less money in consumers pockets to spend in other industries, right?
We got to always remember that a lot of folks even in the very united states of america, okay, a lot of folks even here lived kind of paycheck to paycheck, they don’t have a lot of money leftover at the end of the pie each month. Okay. So when you’re talking about, you know, oil prices.
Jumping that much, what else is going to happen, then products, like even heating oil or something like that, as you go into winter might be more expensive, but especially gasoline is going to be more expensive, have high gasoline prices will obviously jump all over the US.
And those folks that don’t have a lot of extra money to usually spend are going to be probably spending more gasoline because the prices are going to be higher. And obviously that is a very, very negative thing for those folks that might be able to spend some more money in other industries and whatnot. Okay.
Now, also, this is gonna hurt a lot of companies out there, okay. The companies that rely on transportation of physical goods around Okay, this is obviously no bueno for them. Okay. This is not a good situation. If you’re a company, any type of company that relies on a lot of transportation.
You’re either a transportation company, or you’re someone that relies on a lot of transportation of physical goods around the world or the around the United States of America. And you’re Talking about the main fuel for all that transportation, gasoline or oil in general, just getting more and more expensive and coming out of nowhere, like basically literally overnight, a 14 15% increase literally overnight.
That’s a lot of additional cost, okay. And that ends up more than likely hurting your earnings, okay, because no one expected that, like, no one just magically knew this was coming. And so all these companies now that rely on a lot of transportation of physical goods around, they’re all going to get hit, they’re all gonna see their businesses get hurt, earnings will be hurt in the short term because of this, this is something that’s not foreseen.
This is not something companies generally plan for, oh, oil prices is going to go up 14 to 15%. In the next week, companies don’t just guide for this, okay? companies, a lot of times will plan for something like this, okay, maybe if something happens, they have money, you know, on the sideline ready for something like this.
But it’s telling companies when they’re looking at their earnings and what we might earn in the upcoming quarter, they they bake into it a 14 to 15% one day increase in oil prices, like that’s just crazy. Okay, so who are some stocks that could get end up getting hurt, okay, this could affect most of the stocks in the stock market.
But for sure, some of the names that come to my mind are, you know, food retailers, obviously, I mean, think about if your massive grocery store chain like someone like a Kroger or someone like that, right. And you’re you’re gonna have all these trucks going all over the United States of America, you know, giving food to the stores.
Now, you either got to take that hit on all that extra transportation costs that happened overnight, or you have to pass it along to consumers in terms of you know, product increases in price, there’s one of the other you either pass it on to them, or you’re taking the hit on that, or maybe a combo of both, right?
Think about somebody like Walmart, Walmart has one of the biggest fleets of trucking in all the world, and especially in the United States of America, think about the type of hit, they’re going to have to take at least short term with transportation costs.
Us all those massive 1000s of trucks, Walmart has all going all over the United States of America and all over the world, literally overnight, that the gasoline that those trucks use just got massively, massively more expensive. Okay, Amazon, same exact thing, Amazon’s wanting to get more into more into control of transportation and get more and more trucks and guess what, Amazon, you’re gonna have to take the hit on that.
Or you have to pass that hit along to all your consumers. Okay, UPS, FedEx, obviously names, that when you think about, you know, some of the biggest users of gasoline products, FedEx, UPS, those type of names are going to come to your mind first and foremost.
And this just makes me think, Hey, I’m glad I have a Tesla. This makes me like, I don’t know why that just hit me. But I’m like, dang, I’m glad I have a Tesla man. Because guess what, I don’t have to worry about how much the price of oil is this week, or how much gasoline went up when it comes to at least I don’t have to go pay that at the pump.
That’s just I don’t know why that thought just came in my head in my head when I talked to start talking about UPS and FedEx, but I’m glad I drive a Tesla, okay, trucking companies, all these type of companies are going to take massive hits in the short term when you have a 14 15% oil increased jump like that, okay?
Now, also suppliers could end up taking a hit. Imagine all those different products that are traveling on those transportation products, okay, whether we’re talking, it’s pacifiers, or whether we’re talking, it’s iPhones, regardless, all suppliers might end up having to take a hit on transportation costs and what they pay, okay?
Because sometimes these companies can say, Okay, and let’s see, gasoline costs just went up 15%. Alright, let’s go ahead and make 15% more expensive for everything else, or whatever the offset is over 15% gasoline jump there, a lot of these companies will say, Okay, we got to pass this along to our supplier.
So maybe it’s the suppliers end up going into hadn’t taken a hit on that. So anybody that’s traveling on all those trucks, all of a sudden, now they have to take a hit on something like that, okay. So which causes maybe them to miss earnings now, because their product to get around just got a lot more expensive. So they end up having an earnings Miss.
And we’ve seen it before where stocks, you know, it can miss one or two cents on the APS line. And the stocks get absolutely devastated versus if they had beat digest a bit, their stock sometimes go up. So sometimes you’re in these situations where if a company just misses small, even if it’s something like this, sometimes those stocks can get hit in a big, big way.
And so the stock market in the end, they hate earnings misses the stock market hates earnings misses, we know that right, and the stock market doesn’t like that. And stock market really, really hates uncertainty. And when something like this happens, it breeds a lot of anxiety in the stock market and a lot more of just a situation where.
You have more and more uncertainty around transportation costs, the price of oil, the price of gasoline and everything like that. And so for the stock market, it’s definitely not a good thing. Okay, you can make an argument that maybe it’s a good thing for some of the oil and gas companies.
But even for them, it’s not that big of a help when you take into context how many companies will probably be hurt by something like this have a dramatic change in the price of oil like this guys. So for the short term, it is not a good thing. Now with perspective, we got to keep perspective on this long term does it really matter?
If we’re long term investors here doesn’t really matter that much. Not really. Okay, short term, maybe we get some earnings misses from some companies that weren’t that no one was expecting this, maybe some companies Miss earnings because of this.
Okay, as long term investors, we can go ahead and take advantage of some opportunities if some stocks get hit huge because of this because they missed by a few cents because of those gasoline costs going up transportation costs in general have their products going up.
So we can go ahead and take advantage of that, obviously. So for as long term investors, does this really matter, it really doesn’t. But for short term, anybody is paying attention to short term stuff that’s going on you when you look at something like this, it absolutely does have an effect on the market.
Okay, and it absolutely does have an effect on consumers. So from a short term perspective, you can absolutely feel ripples coming in the stock market and consumer confidence and consumer spending in other industries when you talk about something like this, okay, so it absolutely does matter.
But it just matters a lot in the short term. And from a long term perspective you know, this will all be forgotten in six months or 12 months from now but for right now for right now, it absolutely matters in a huge way so anyways guys I want to hear your opinion down there in that comment section.
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