Oil price news, oil and gas analysis, energy supply & demand, oil technology, gas and oil reserves, alternative energy Oil price news, oil and gas analysis, energy supply & demand, oil technology

Energy Insights: Energy News: At Davos, CEOs Eagerly Await Boost From Oil Price Drop

 Energy News

<% if 0 then %> <% end if %>
old news articles

At Davos, CEOs Eagerly Await Boost From Oil Price Drop



For Some Companies Lower Oil Prices Mean Savings and a Revenue Boost

An oil refinery operated by OAO Lukoil, in Nizhny Novgorod, Russia.
An oil refinery operated by OAO Lukoil, in Nizhny Novgorod, Russia. Photo: Bloomberg News

DAVOS—Low oil prices have roiled oil exploration and production companies, but chief executives from a wide swath of the global economy, gathered here for the annual World Economic Forum are looking forward to a boost from the drop.

Oil prices are down more than 50% since June, amid a supply glut partly due to booming American shale-oil production. In November, the Organization of the Petroleum Exporting Countries chose to maintain its output levels, saying it wouldn’t risk market share as non-OPEC producers, from the U.S. to Russia, continue to pump flat out.

That has slammed big oil firms and companies that provide services for the sector. A number of big companies, from ConocoPhillips to BP PLC, have signaled they will be cutting back capital spending. On Thursday, OAO Lukoil Holdings President Vagit Alekperov said in an interview here that the Russian oil giant was cutting its 2015 investment plan by 10%, or $1.5 billion, in response to low oil prices.

But for companies that make oil-based products or serve customers who are now spending less on gasoline, lower prices are translating into saving or promising to boost revenue from consumers with more discretionary cash.

Nils Andersen, the chief executive of the Maersk Group, the Danish shipping and infrastructure conglomerate, also runs significant operations in oil exploration, drilling and transport. Mr. Andersen says lower oil prices have hit the company, but expects to see benefits: Lower crude will help bring the company’s own shipping costs down, while also unlocking global demand for trade of goods.

“Global demand for containers should go up,” Mr. Andersen said. “As we see it, low oil prices should help the European economy generally.”

Sealed Air Corp. which makes packaging products such as Bubble Wrap and food packaging, started seeing its resin costs decrease in December, said Chief Executive Jerome Peribere. Prices for the U.S.-based company’s oil-based products declined again in January, he said.

“The low oil costs will help us offset negative currency swings,” said Mr. Peribere. A strong dollar has hit some U.S. companies whose overseas revenue is now valued less in dollar terms.

Historically, gasoline prices and consumer spending have been closely intertwined. When prices at the pump are expensive, consumers tend to cut back on spending elsewhere to offset the rise. When gas prices come down, retailers often see upticks in sales.

“It’s got to help,” said Richard Gelfond, chief executive of IMAX Corp. , the U.S.-Canadian movie theater firm. “People drive to the movies and will now have extra money in their pockets that they can spend on entertainment,” Mr. Gelfond said. France’s L’Oréal SA, the world’s largest cosmetic company, said the decline in oil prices “puts a lot of money into the pockets of our consumers.”

U.S.-based medical supplier Henry Schein Inc. uses oil-based products in everything from rubber gloves, one of its top-selling products, to face masks and tray covers. It also ships orders to customers globally. Chief Executive Stanley Bergman said he expects to see lower costs “ripple through the supply chain” because of the lower cost of oil. He also expects fees on shipping products to decrease.

Write to Dana Mattioli at and Dennis Berman at

Printer Friendly version...

Site Map | Privacy Policy | Terms & Conditions | Contact Us | ©2004