Oil prices hit a six-week low on Wednesday, as ample supplies and weak demand led to a 3.5% decrease in crude oil for October delivery. Energy prices generally followed oil down, leading to lower fuel costs for transportation companies. Ocean shippers and passenger planes rose on the news, but railroads were down.
Aviation fuel is a major expense for passenger airlines, which have shown weakness in recent months (and, in the case of legacy airlines, recent years and decades, for that matter -- it hasn't been a very profitable industry). United Continental
Maritime transportation also saw big gains as prices for the bunker fuel they use, a low-quality fuel source that nonetheless constitutes the bulk of voyage expenses, dipped lower. As bunker fuel prices rose over the summer, many shippers resorted to slowing their ships down to more fuel-efficient cruising speeds to cut expenses. The industry's biggest gainer was dry-bulk goods carrier DryShips
On the other hand, the Dow Jones Railroad Index closed the day down 1.2%. Railroads generally benefit from higher fuel prices because of their more efficient operations, making them less competitive in periods of cheap fuel. Lower demand for energy products could also translate to lower volumes shipped for coal, a major revenue generator for companies such as CSX
CSX investors were spooked by rival railroad Norfolk Southern
As today's activity demonstrated, the transportation industry will continue to be affected by falling energy prices in various ways. A boom in natural gas recovery and weak economic recovery has hit prices hard, but one Motley Fool analyst predicts a recovery in energy prices by 2014 and has identified one stock you need to own before they do. This report is free but is available for only a limited time, so get your copy now.
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