— This is the script of CNBC's news report for China's CCTV on May 21, 2018, Monday.
Let's take a look of winner first, energy companies and oil producing countries are definitely the beneficiary of high oil price era, this is because higher oil price can push energy giants' cash flow and profits increase. And for the stock sector, the share price of oil and gas companies has soared in recent days, let's use an analogy.
Sea drill as one of the major deep-water drilling companies in the world applied bankruptcy protection during the low oil prices time. However, currently, the buoyed oil price rebuilds Sea drill's confidence to carry out reorganization plan.
So in the last month, Sea drill's share price soared around 110%
Additionally, rising oil prices make oil companies' revenues soar and this also improve the prospect for shareholders' returns. For example, BP, the British oil company, implied on May, 1 that they may raise dividend later this year to boost investors' confidence. Another example is that major oil exporters such as Saudi Arabia are also the major winners.
Among them, the oil price buoyed nearly to $80 dollars now, narrowing Saudi's budget deficit; the proportion of budget deficit in GDP for Saudi declined from 12.8% in 2016 and Saudi said that this proportion will decrease to 7% this year.
Let's take a look of loser, airlines, shipping business and consumers that on consumer side will be the losers amid buoyed oil price, and airline bear the brunt firstly.
Let's see the chart of jet-fuel price trend, the fuel price rose about 60% in the past one year and that increased 15% this year. However, fuel cost which is usually the second largest expense for airlines after labor costs, accounting for one third of airlines' operational cost.
The coming summer is the busiest period for global airlines, so airlines don't have other choices, the increased oil price making airlines' profit reduced, so the increased cost may pass on to consumers by raising ticket price.
On the front of market, aviation sector has recently been sold. For example, the share price of American Airlines has fallen by 16.63% this year, and the company also lowered its profit forecast for 2018.
For the market, risk factors that continue to push up oil prices remain. Apart from the potential influence of the situation in Iran, the presidential election in Venezuela is ongoing.
It is expected that the current president, Maduro, has a very good chance of winning. If he is re-elected, then the United States may take a new round of sanctions against Venezuela, which will bring a new crisis to this country who is already in economy dilemma, and if U.S. refineries are prohibited from buying Venezuela's crude oil.
Then this situation will cut supply and make oil price goes up further in overall supply and demand. We will keep an eye on this issue.