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There are a number of earnings reports coming out this week and with oil ending today below $45 I decided to discuss the potential impact of the price of oil on some of the companies releasing their Q2 2015 reports.

Recently the price of oil has crashed with a 52-week high of $93.34 to a 52-week low of $43.35; oil has dropped 22.70% in 2015 alone.  This has caused some obvious losers like oil and natural gas exploration companies but what about the not so obvious winners?  In Q1 2015 the average price of WTI crude was $48.54 this helped companies like Air Canada post record breaking profits.

Statista

One of the driving forces behind their outstanding quarter was the drop in the price of oil.  In Q1 2014 the cost of aircraft fuel was approximately 25% of total operating expenses of CAD$3.127 billion.  In Q1 2015 the cost of aircraft fuel was approximately 19% of total operating expenses of CAD$3.049 billion.

Q1 2015 is in gray Q1 2014 is in white (dollar amounts in Canadian Dollars)
According to the chart above the only operating expense that dropped significantly was Aircraft fuel decreasing by CAD$201 million a significant contributor to their CAD$78 million total operating expense improvement.
In Q2 2015 the average price of oil increased to $57.84 or an almost $10 increase.  This is important to keep in mind that while oil has been significantly down this year one should not expect the same savings on the price of fuel in Q2 2015 that we saw in Q1 2015.
I still believe that the price of oil has a long way to go before we see the bottom, with Iran potentially coming into the marketplace nobody knows in six months what the surplus of oil and gasoline is going to be.  For now lets all look forward to saving at the pump and seeing companies with high fuel costs post significant decrease in operating costs.
  • Industries with high fuel costs
    • Airlines
    • Waste Management
    • Transportation
    • Etc.
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