I think it is cheaper to transport goods by rail than road. Maybe the trains are powered by oil, so fuel costs rise, but the railroads become more competitive because it is expensive to run trucks also.
So, what's the answer? Are high oil prices good or bad for railroad stocks.
2007-10-19 05:22:23 · 3 answers · asked by Experimentor 2 in Business & Finance ➔ Investing
Just correlate railroad and trucking stock charts with that of oil.
2007-10-19 07:14:35 · answer #1 · answered by Anonymous · 0⤊ 0⤋
I think if it were that simple it would be a lot easier to make money in the market.
You need to consider some other factors. As oil prices rise, consumers have less discretionary income, because more of their money goes to fuels for driving and heating (winter is coming!).
In addition, higher oil prices lead to higher costs in manufacturing, especially for petroleum derivatives like plastics.
If consumers have less to spend, and manufacturing goods costs more, is there enough of an off-set gained by shipping by rail? Not sure, the net could still be a loss which leads to less demand for goods in the economy. Ultimately, it might just balance out. That is, manufactures may ship more by rail, but overall production may have fallen enough to off set the increased shipping.
My gut feeling is no, higher oil prices will not lead to better performance in railroad stocks.
2007-10-19 12:36:05 · answer #2 · answered by Ten Years Gone 4 · 1⤊ 1⤋
Bad. It increases their fuel cost and they may not be able to pass this on to customers, which will eat into profits .
2007-10-19 13:19:30 · answer #3 · answered by Ted 7 · 0⤊ 0⤋