Filed under: Sector Trends · Investment Strategy
The low-oil era we aren't talking about enough
Globally, oil prices have been on a downward trajectory. Over the past year, crude has dropped by approximately 25%, and Goldman Sachs expects this trend to intensify. Their 2026 outlook is striking:
Why the bearish outlook? Supply remains aggressive. The U.S. and Russia continue to ramp up production, while previously sidelined players like Venezuela and Iran are positioning themselves to add more barrels to the global market over the long run. For prices to rebound, we’d likely need significant OPEC+ intervention or a major geopolitical disruption—both of which are notoriously difficult to bank on.
So, the real question is: Who wins when oil stays cheap?
1. Delta Air Lines (DAL)
The Premium Leader of the Skies with a Growing Tailwind
Delta stands as a titan among the “Big Three” U.S. carriers. Its focus on premium service and brand loyalty has historically bolstered its bottom line.
Why lower oil helps:
Jet fuel is a massive line item, typically accounting for 20% to 30% of operating expenses. Since ticket pricing is generally more sensitive to consumer demand than fuel fluctuations, a rapid drop in fuel costs allows margins to expand significantly. Furthermore, Delta takes a sophisticated approach to fuel management, utilizing its own refining exposure to hedge against volatility.
2026 Outlook:
With average jet fuel prices expected to trend lower than in 2024 and Delta’s commitment to keeping non-fuel unit costs at single-digit growth, the company is set for meaningful operating leverage.
2. FedEx (FDX)
Stable Shipping Rates, Expanding Margins
As a global logistics powerhouse, FedEx is the circulatory system of the e-commerce economy.
Why lower oil helps:
Fuel is the lifeblood of long-haul logistics. While FedEx employs a fuel surcharge—passing costs to customers when oil rises—the inverse is where the magic happens for margins. When oil falls, costs drop immediately, but shipping rates don't always follow suit at the same pace. If competition remains rational, this lag translates directly into profit.
2026 Outlook:
FedEx’s internal efficiency program, "DRIVE," is already optimizing its network. Cheap oil acts as a catalyst for this transformation. If package volumes remain stable, the pace of profitability could accelerate. Key Variable: Watch e-commerce volume closely.
3. Valero Energy (VLO)
The Refiner’s Strategic Advantage
As one of North America’s largest independent refiners, Valero’s model is simple: buy crude, sell refined products.
Why lower oil helps (The Nuance):
For refiners, it’s all about the "crack spread"—the difference between the price of refined products and the cost of crude. While falling oil can sometimes hurt inventory value in the short term, a sustained low-price regime is often beneficial. If crude stays weak while demand for gasoline and diesel remains resilient, Valero can capture significantly higher margins.
2026 Outlook:
The market expects Valero’s profitability to sharpen if crude prices continue to slide. However, investors should note the structural volatility: environmental regulations and the shift toward low-carbon fuels remain long-term hurdles.
Epilogue
The investment thesis for a "lower-for-longer" oil era is straightforward: Study the cost structures.
If your base case is cheap oil paired with a steady global recovery, these three deserve a spot on your 2026 watchlist.
Disclaimer: This post is for informational purposes only and does not constitute investment advice.
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