The stock prices of consumer packaged goods companies should react favorably to any significant decline in oil prices. Lower oil prices generally mean increased profit margins for these companies.

Consumer packaged goods (CPGs) are typically consumed in a short time period. CPGs contrast with durable goods such as appliances and other items designed to last for several years. Examples of CPGs include food and beverages, such as cereal and soft drinks, and household cleaning products, such as paper towels and disinfectant sprays. Profit margins on consumer packaged goods may be relatively low, but the CPG sector is usually a very profitable one because CPG producers have very high sales volume levels. Many CPGs fall into the consumer staples category.

Companies that produce consumer packaged goods benefit from reduced oil prices in two ways, both of which significantly improve their profit margins. They first benefit from reduced costs for packaging their goods. Since nearly all packaging is produced using crude oil derivatives, it follows that reduced oil prices lead to reductions in the price of packaging materials. CPG companies also benefit greatly from reduced shipping costs that result from lower gas and diesel fuel prices. Packaging and shipping are the major costs for companies that sell CPGs, so savings in these cost areas have a substantial effect on profitability. If oil prices remain lower for an extended time period, the increased profits should naturally lead to increased share prices for most of these companies as well.

The packaging industry itself also benefits from reduced crude oil prices since, as noted above, oil derivatives are used to manufacture plastics and other basic packaging materials. Resin, another oil derivative, accounts for a large portion of the cost of goods sold in the packaging industry. Significantly lower oil prices generally mean that producers of packaging can increase their profit margins even while lowering prices to customers.

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