Tesla Jumps on Crude Oil Surge, But EV Demand Link Remains Uncertain
Tesla shares jumped 4% on Monday as crude oil prices surged to $86.06 per barrel, sparking debate about the impact of rising fuel costs on electric vehicle demand.
The spike in crude oil was driven by fresh tensions between the US and Iran, which has constrained shipping through the Strait of Hormuz and pushed up the risk premium for energy investors.
The connection between higher gasoline prices and increased demand for electric vehicles is a plausible one, but it's not clear if it will hold this time around. In April, when oil prices spiked due to similar tensions, Tesla shares actually fell 22% year-to-date through Friday's close, suggesting that the link may be more nuanced than initially thought.
Rivian and Lucid Group, other pure electric vehicle names, have not seen the same boost as Tesla, which suggests that the pass-through effect may not work evenly across all EV makers. Consumer sentiment is also a concern, with the University of Michigan index at 55.2, below the level considered recessionary.
Position sizing is crucial on days like this, as exposure taken in Tesla stock can reverse quickly if the underlying story doesn't hold up to scrutiny.