As Oil Surges, Does Tesla Stand to Benefit?

March 03, 2022 09:46

Yesterday, Federal Reserve Chair Jerome Powell spoke to the US House of Representatives Financial Services Committee and, during a week in which uncertainty has gripped the financial markets, Powell’s comments helped calm some investor concerns.

Prior to the outbreak of conflict in eastern Europe, many had expected the Fed to raise rates aggressively at their policy meeting this month, in an attempt to rein in inflation. However, in yesterday’s speech, Powell seemingly poured cold water on this idea, stating that he was inclined to support a 25 basis point hike in interest rates.

The market’s response was positive. Having closed lower on Tuesday, Wall Street ended yesterday resoundingly higher, with all three main benchmark indices recovering Tuesday’s losses. The Nasdaq Composite, Dow Jones and S&P 500 all closed the session with gains of 1.62%, 1.79% and 1.86% respectively.

Meanwhile, oil prices continue to surge higher.

Brent crude, which was apparently not satisfied with breaking above $110 a barrel yesterday, rose above the level of $120 a barrel this morning for the first time since April 2012.

This relentless rise in oil prices is a concern for global inflation, which is currently running high.

High oil prices increase input costs for businesses which in turn forces them to raise prices for consumers. This, amongst other things, has played its part in the ongoing uncertainty we have witnessed in the financial markets recently, particularly in the equities market.

This week, the S&P 500 has been pretty much flat, with yesterday’s closing price taking the index’s weekly gains to 0.04%. However, within the index there are a handful of companies which have performed well this week, despite the uncertainty and turmoil. Two such companies are Tesla and Chevron.

Two very different companies which represent two different ways of looking at how higher oil prices will affect our energy consumption.

On one side, Tesla, undoubtedly the current king of electric vehicle manufacturing. Whilst the S&P 500 has been flat this week, Tesla shares have gained 8.7%.

There is an argument to be made that, the higher oil prices and other fossil fuels become, the more appealing electric vehicles will become to consumers and the more investment we will see funnelled into cleaner energy sources. In other words, high oil prices could see our transition to cleaner energy sources move faster. Is this likely?

Whilst high oil prices may spur an increase in demand for electric vehicles, which companies such as Tesla would benefit from, it also increases investment in oil. When oil prices are high, there are more profits to be made from producing oil and, therefore, oil companies tend to increase drilling and production.

In history, this has happened time and time again. The oil market booms, production increases which then, eventually, suppresses price as supply catches up with demand.

And this is why oil producers such as Chevron, whose share price has risen 9.8% this week, are also likely to do well in the current climate.

Depicted: Admirals MetaTrader 5 – Tesla Daily Chart. Date Range: 26 October 2020 – 2 March 2022. Date Captured: 3 March 2022. Past performance is not a reliable indicator of future results.

Depicted: Admirals MetaTrader 5 – Tesla Weekly Chart. Date Range: 9 August 2015 – 2 March 2022. Date Captured: 3 March 2022. Past performance is not a reliable indicator of future results.


Invest with Admirals

With an Invest.MT5 account from Admirals, you can invest in Tesla, Chevron and over 4,300 other listed companies from 15 of the largest stock exchanges in the world. In order to find out more, click the banner below:

Invest in the world’s top instruments

Thousands of stocks and ETFs at your fingertips


The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admirals investment firms operating under the Admirals trademark (hereinafter “Admirals”) Before making any investment decisions please pay close attention to the following:  

  1. This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
  2. Any investment decision is made by each client alone whereas Admirals shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
  3. With view to protecting the interests of our clients and the objectivity of the Analysis, Admirals has established relevant internal procedures for prevention and management of conflicts of interest.
  4. The Analysis is prepared by an independent analyst Roberto Rivero, Freelance Contributor (hereinafter "Author") based on personal estimations.
  5. Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admirals does not guarantee the accuracy or completeness of any information contained within the Analysis.
  6. Any kind of past or modelled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admirals for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
  7. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.
Roberto Rivero
Roberto Rivero Financial Writer, Admirals, London

Roberto spent 11 years designing trading and decision-making systems for traders and fund managers and a further 13 years at S&P, working with professional investors. He has a BSc in Economics and an MBA and has been an active investor since the mid-1990s