Gas Prices Rising Again Near $4 a Gallon – ValueWalk Premium

Gas Prices Rising Again Near $4 a Gallon

Gas Prices Rising Again Near $4 a GallonIts Monday morning and guess what? Gas is up yet again, the 20th day in a row. The national average rose to $3.70, up from $3.41 a month ago.

Gas continues to surge based on Iran’s threat to cut production to the US and other countries. Improving economic conditions in the US and the world have also boosted oil’s price.

The problem with rising gas prices is that they can hurt the fragile consumer. Consumers will often not go out due to the expensive prices to fuel the car. Usually when gas prices get this high or even higher, it is a good idea to short restaurant stocks and airlines.

When oil (NYSE:USO) is above $100 a barrel, airlines’ profit margins essentially vanish. They are basically losing money every time they fly because the prices they are paying to fuel the planes are not being offset by the ticket of the passenger. Often times as well, the airline will raise prices for their tickets causing consumers to delay flying until ticket prices come down.

Same sort of logic for restaurants applies to the airline example above. When oil rises above $100 and gas is threatening $4, families will often stay at home. This is especially true during a recession when unemployment is high. People are trying to save money for other ventures. Think of how expensive that night out would be. Gather the family into your gas guzzling SUV, head to the local gas station, pay close to $100 for gas, then goes to a restaurant and pay another $50+ for food. That is just too much to handle for a typical family. That is why looking to short restaurant stocks may not be a bad idea here.

There are plenty of other ways to pay oil of course then just shorting airlines and restaurants. You could buy oil stocks, who are certainly sitting back and counting their money right now. If you do not like to pick individual stocks then maybe an energy ETF would do the trick.

Higher oil prices are going to be our thing for awhile until this Iran situation blows over. Until then, we will just have to endure the pain and hopefully it does not derail our rally and our economy in the process. At any rate, offset your rising charges at the pump with one of the investment ideas that I listed above. If you going to deal with higher gas prices, you might as well reap the benefits as well.


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