The law of physics dictates that whatever comes up, must come down, and oil prices and exchange traded funds (ETFs) are not immune to this. During recent months, oil prices have taken off and gone higher and higher.  Some analysts are calling for oil to top at $150-$200 until prices begin to ascend, reports Michael Lynch for MarketWatch. But over the past few days we’ve seen oil prices retreat.  In fact, this morning oil dropped below $123 per barrel, off from a high of $135.

So what happens when the price of oil backs down? The effects could trickle into every economic tier, with a boost to certain economies, such as Russia, while interest rate pressure would alleviate in Europe and Asia, leading to a stronger U.S. dollar.

As the price of oil falls, Lynch looks at the different sectors and how they might be affected.

  • Consumer spending could improve as there is less money going into the gas tank: iShares Dow Jones U.S. Consumer Goods (IYK)
  • Lower inflationary pressure may do well for bonds: Vanguard Total Bond Market (BND)
  • A stronger dollar may emerge: PowerShares DB U.S. Dollar Index Bullish (UUP)
  • Oil company’s may not see the astronomical profits they’ve seen lately: Energy Select Sector SPDR (XLE)
  • Oil service companies will feel price pressure: Oil Services HOLDRs (OIH)
  • If weaker demand is reason for the decline, then refineries could be hit: iShares Dow Jones U.S. Oil & Gas Exploration Index (IEO)
  • Petrochemical producers use large amounts of energy so they would welcome the lower price, thus helping agribusiness and food prices: Market Vectors Global Agribusiness (MOO)
  • Trucking companies can deliver those packages with lower fuel costs: iShares Dow Jones Transportation (IYT)
  • Could alternative energy be shunned as the "crisis" subsides? Market Vectors Global Alternative Energy (GEX)

For full disclosure, some of Tom Lydon’s clients own IYT.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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