The increase or decrease in crude oil price affects the work of the companies listed in the share market, which also affects their share price. If you want to earn maximum profit from the share market, then you must keep an eye on the price of crude. The increase or decrease in crude oil price can be a signal for entry or exit in a company.
Today we will discuss which sectors are affected by the price of crude oil.
Logistics Industry
From an average consumer’s point of view, higher oil prices mean higher transportation costs, and higher transportation costs translate into higher prices of everyday goods. In fact, fluctuations in oil prices affect all oil-dependent sectors, including the logistics industry. The rise in crude oil prices can be directly seen in the shares of logistics companies.
Oil Industry
While the common man faces problems due to the increase in the prices of petrol and diesel, on the contrary, the oil companies earn a lot of money from the increase in the price of crude oil. But from the investment point of view, one should be very careful while investing because at this time there is a lot of fluctuation in their share prices and this happens for a very short time. Meaning, it is not right to invest in these companies for a long time on the basis of crude oil price.
Paints Company
Out of the total raw material cost for making paint, 50%-60% of the cost is spent on crude oil. And the price of crude oil is never stable. And the paint manufacturing company has to bear a huge loss due to this. Sudden increase in oil prices affects the company’s profit and profit margin. This is the main reason for the negative reaction of investors in the stock market towards paint stocks.
Tyre Industry
Tyre manufacturing companies are also not untouched by the impact of crude oil, 50 percent of the total cost of manufacturing tyres is of crude oil. The increase in the price of crude oil may put pressure on their operating profit and profit margin. Its effect can be seen in their share price in the short term.
Aviation Sector
Any aviation company like Boeing, Airbus, Air India, Vistara are some examples which are directly affected by the price of crude oil. Aviation Turbine Fuel (ATF) accounts for 40% of the cost of raw material in these companies. Whenever there is an increase in the price of ATF, it directly affects the profitability of such companies. Which you can also see in their share price.
Cement Company
Cement production depends mainly on energy derived from fossil fuels, especially coal and pet coke, which are linked to crude oil prices. As oil prices rise, the cost of these raw materials increases, which increases the operating costs of cement companies. But still the increase in prices does not affect these companies much. For the economic development of the country, the government keeps supporting the real estate sector, which helps in the profitability of this sector.
These points highlight the complex interrelationship between oil prices and the financial performance of this sector. Investors and analysts keep a close eye on these factors to make decisions about investing in these sectors. Diversification and long-term investment strategies can help reduce the risks associated with the volatility of oil prices and their impact on industries.
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