Will higher oil prices spark a Tesla stock surge?
As Ukraine weathers a continued Russian invasion, sanctions are causing high oil prices, resulting in high gas costs at the pump for consumers. According to Oil Price.com, the event has many wondering if high gas prices could further accelerate Tesla's rising stock prices and the overall adoption of electric vehicles.
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Above: Tesla's Model 3 (Source: EVANNEX; Photo by Casey Murphy)
Brent Crude oil hit a 14-year high of $139 per barrel earlier this month, compared to benchmark averages of just $70 in 2021 and only $43 in 2016. Analysts from Goldman Sachs and JP Morgan expect the company's oil barrels to increase to $135 and $185 respectively this year.
The 14-year price hike came just as U.S. President Joe Biden began targeting "the main artery of Russia's economy" by imposing sanctions on the country's oil operations, adding that the move is "not without cost at home." This "cost" is largely passed down to consumers at the gas pump, which could spark an even quicker move to non-petrol vehicles than previously thought.
EV automaker Tesla could be uniquely positioned to benefit from the rise in prices, especially since the news comes on the heels of Tesla being given final approval to begin producing vehicles at its new Gigafactory Berlin-Brandenburg and Giga Texas locations. With the aid of the new factories, Tesla is also shooting to double its annual production output to nearly 2 million cars this year.
The cost to fill up a gas car versus the cost to charge an EV pic.twitter.com/6xyK5h9DFj
— Whole Mars Catalog (@WholeMarsBlog) March 21, 2022
Twitter: Whole Mars Catalog via CNBC
Analysts note that Tesla's Giga Berlin in Grünheide, Germany is a significant strategic advantage for the automaker. Wedbush's Daniel Ives calls the company's momentum for deliveries "extremely solid," despite continued semiconductor shortages and supply chain issues.
In a note, Ives said he "cannot stress the production importance of Giga Berlin to the overall success of Tesla's footprint in Europe and globally," reiterating his $1,400 price target on the company's stock alongside a $1,800 bull case price target.
In addition to high prices at the gas pump potentially causing consumers to buy electric, Tesla's stock has already begun to see gains amidst the record oil prices.
Above: The number of people browsing for electric cars has increased as gas prices climbed, according to Edmunds (Source: NBC News)
Tesla's shares fell to just $764 in February before shooting up to a price of $880 following the first week of the Russian invasion at the beginning of March. On Friday, March 18, Tesla's shares jumped from $870 to a closing price of $905 the day after pausing a car lease-backed bond sale at $1 billion, reports MarketWatch.
Some also expect oil demand to decrease amidst its rising price, with Forbes reporting earlier this month that high gas prices are likely to result in fewer vacations in the U.S. this summer, while high-luxury vehicle-selling states like California are reaching new milestones in the sale of battery-electric vehicles.
Tesla is already poised to capitalize on rising oil prices, and while it's unclear how long high costs of petroleum will last, the automaker's sales (and shares) are both starting to reap the benefits of a mass transition to EVs.
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Sources: Oil Price.com / MarketWatch / Forbes
