Airlines, packaged food and shipping companies are the largest beneficiaries of plunging oil prices as fuel accounts for a significant part of their costs, while the automotive, building materials and chemical sectors will realise moderate gains, according to Moody's Investors Service.
Thai Union Frozen Products Plc (TUF), the world's largest tuna company, expects total cost savings of about 5% once the full impact of lower oil prices is seen.
Passenger airlines' financial performance will improve in 2015 as a result of the recent drop in crude prices as fuel represents 30-50% of an airline's operating expenses, said Moody's vice-president Jonathan Root.
Legacy carriers with higher labour costs are at the lower end of the range while low-cost startup carriers in developing economies are at the higher end where the proportion of fuel costs is concerned. However, losses on fuel hedge books will consume some of the cash flow benefits of lower fuel prices, a recent report by Moody's cautioned.
If the average price of Brent crude remains around US$55 a barrel, Moody's forecasts a jet fuel price of about $1.65 per US gallon (3.8 litres), including into-plane costs and taxes. Assuming a loss of about 3 cents per gallon from hedge positions, US airlines rated by Moody's can expect their fuel expenses to decline by $16 billion, said the report that was partly prepared by Mr Root.
But don't expect passengers to benefit from the windfall.
"We believe airlines, particularly US carriers, will not share their new-found fortune with customers by lowering fares due to still-high load factors and sustained demand. Fuel surcharges are more prevalent outside the US and are typically regulated by governments including those of China and Japan," it said.
"Fares in international markets, particularly for long-haul flights, will likely decline as fuel prices fall, limiting the boost in operating earnings for these carriers. With capacity growth reportedly outstripping demand growth across Asia, we believe that lower fuel prices will discourage local operators from adding more capacity than they already plan."
FOOD INDUSTRY IMPACT
A sustained period of low oil prices will also improve the margins of processed food manufacturers which spend 10-15% of the cost of goods sold on freight and fuel. As well, these companies should see sales increase as cheaper oil boosts confidence and encourages consumers to their extra cash on discretionary food items.
"Consumers will also trade up to higher-value food items more easily, and their increased confidence will make them more likely to try new products, reversing recent spending trends," the report said.
Low oil prices will also significantly reduce the cost of packaging, mainly PET (polyethylene terephthalate) and plastic for food and consumer goods companies. Though it will take time before they can adjust supply contracts, food companies should see better margins after a sustained period of high competition and weak demand.
Restaurants will likely benefit from higher consumer confidence, though not as dramatically, with quick-service outlets such as McDonald's benefitting from lower-income consumers, who tend to see the biggest increase in their disposable income when fuel prices are low.
Thai Union Frozen Products Plc (TUF), the world's largest tuna company, said that so far its transport costs had fallen by 3%, while suppliers of plastic and other packaging materials have also started cutting their prices.
"We expect the impact in terms of gains from lower oil prices to be more substantial in the next six months," said TUF president Thiraphong Chansiri.
The SET-listed company estimates that overall, its costs should be reduced by 5% if oil prices remain around current levels. But much greater impacts would be seen if cheaper oil starts to bring down electricity tariffs. That could still be a month or two away, as natural gas prices tend to lag oil prices by up to six months, and natural gas accounts for 70% of the fuel used to generate electricity in Thailand.
"If the electricity tariff is reduced, it will benefit not only TUF but also shrimp farmers and other suppliers," said Mr Thiraphong.
For container shipping companies, fuel accounts for 20-25% of total costs, Moody's noted. The Bloomberg weighted-average bunker fuel price is currently around $340 per ton, down from an average of around $600 since mid-2013, and a peak of nearly $740 in March 2012.
"The container shipping segment will benefit the most because the operators pay all voyage costs including fuel, the price of which is correlated to oil prices and is a large cost item for them," said the Moody's report.
"However, the benefits will be temporary due to the very competitive nature of this segment and these companies will have to pass on price reductions to their customers after two to three quarters."
Meanwhile, dry-bulk and tanker companies charter or lease a large portion of their fleets, so the party that leases the vessels is responsible for voyage costs including fuel. The more a shipping company charters out its fleet, the less exposed it will be to oil price changes.
"Companies that rely heavily on the spot market are most exposed to fuel cost fluctuations and will benefit the most," said Moody's. "However, lower fuel cost may provide only temporary benefits because the saving eventually will be passed through to customers via either lower freight rates or muted rate hikes."
Moody's also noted that low oil prices will benefit Asia's chemical producers by reducing the cost of naphtha, their key raw material. Petrochemical consumption continue to rise in most Asian countries including India and China.
"The thin spread between naphtha and petrochemical products widens as oil prices fall. The better margin will also benefit integrated oil refiners that also produce petrochemicals including Thai Oil and IRPC but margins will narrow for Asian chemical producers that rely on natural gas including PTT Global Chemical, which procures its feedstock under long-term fixed contracts," said the report.
Building materials including cement, clinker and ready-mixed concrete will benefit moderately from lower oil prices, not only because of lower transport costs but also from broader economic gains from higher market consumption and healthier government budgets.
Energy represents about 20% of production costs for makers of cement, clinker, bricks, tiles and certain asphalt products and even more for liquid asphalt. Logistics costs such as diesel account for a further 15-20% of energy costs, according to Moody's.
MODEST GAINS FOR CARMAKERS
Falling oil prices will also have modestly positive impact on global automotive demand, particularly for larger cars, light trucks and sport utility vehicles (SUVs) but a significant shift in purchasing patterns is unlikely unless consumers believe that low fuel prices will be sustained over the long term, it added.
Falling oil prices will likely benefit Japanese automakers less than their US counterparts which have broader lineup of light trucks and SUVs. Among the three leading Japanese auto companies, Toyota is pointed to be the biggest beneficiary because it sells more light trucks in the United States than Nissan and Honda.
"In China, the retail price of gasoline is regulated by the government and doesn't fluctuate freely with international oil prices, potentially diminishing the benefit of lower energy prices for motorists and would-be car buyers," said Moody's.
"In other emerging markets, fiscal constraints have prompted the governments of countries including India, Malaysia and Indonesia to scale back or eliminate fuel subsidies, offsetting the impacts of declining crude prices. This has resulted in limited, if any, savings in vehicle operating costs. We expect the auto sales growth rate to remain relatively subdued in these markets."