WTI crude oil prices climbed above $48 this month for the first time since October, but it’s not just oil producers that are welcoming rising oil prices. SolarCity (SCTY), Tesla Motors (TSLA) and Waste Management (WM) could all potentially benefit from a return to high-priced oil.
SolarCity (SCTY)
It may seem counter-intuitive for the largest U.S. residential solar installer and the oil industry to see eye-to-eye on oil, but solar companies like SCTY are cheering for higher oil prices as much as oil producers are. The economics of rising oil prices pushes customers to alternatives like solar.
Sure, installing solar panels on your rooftop may feel good because of the positive impact on the environment. But let’s face it: the higher your traditional energy bill gets, the better that switch to alternative is going to feel.
Oil prices were as high as $107/bbl as recently as June of 2014. In the time between its 2012 IPO and that June 2014 peak in oil prices, SCTY stock surged 345%. Since oil prices began to collapse, it’s down 65%.
In the time since crude oil’s most recent nadirs in February around $33/barrel , SCTY stock is up more than 25%.
Tesla Motors (TSLA)
Ironically, between SCTY and TSLA, Elon Musk’s renewable-heavy investment strategy may make him the single largest beneficiary of a recovering U.S. oil market. Like SCTY, TSLA is attempting to disrupt an automobile industry that has revolved around gasoline for more than a century. The more customers get frustrated with paying for gasoline at the pump, the more likely they are to make the transition to an electric vehicle.
But you don’t have to take my word for it.
The “industry as a whole, I think, will definitely suffer from lower oil prices,” Musk told CNN back in January when the bottom was falling out of crude. “It just makes economic sense.”
Obviously the highly-publicized unveiling of the Model 3 was a huge catalyst, but TSLA’s stock has surged about 50% since oil hit its February bottom. In the year leading up to that bottom in oil prices, the TSLA stock price fell 31%.
Waste Management (WM)
Crude oil and natural gas are major components of plastic production, so lower oil and gas prices mean plastics can be produced much more cheaply. That’s great news for companies that use a large amount of plastic. But the lower the price of plastic, the less economical recycled plastic becomes.
WM is the nation’s largest plastics recycler, and low oil prices have forced the company to shut down about 10% of its material recycling facilities. The irony of the recycling business’ reliance on a thriving oil industry does not escape Rumpke Consolidated Companies head of recycling Steve Sargent.
“Nobody wants the price of oil to go up,” Sargent said last year, possibly because rooting for higher oil prices isn’t a popular stance with average Americans. “But we want the price of plastic scrap to go up. Those two worlds collide with each other.”
In the year prior to oil’s February bottom, WM’s stock was up less than 0.1%. But in the three months since, it is up 10.8%.
Disclosure: As of this writing, Wayne Duggan had no positions in any of the stocks mentioned.
