It doesn’t take a genius to know that oil has a close relationship with the economy. But what aspiring traders and investors don’t usually understand is the extent of this relationship, or in other words, how much impact oil really has the economy. It’s so potent that it has the ability to affect consumer behavior, consumption, and for equity investors, stock prices. Of course, there are industries that aren’t sensitive to oil prices. Our concern is the ones that are. Here are the industries that are taking the same beating as oil prices right now.
#1 Oil alternatives
To be a little more specific, oil alternatives refer to energy sources such as natural gas, environmentally friendly energy, and coals. The basic concept to understand here is that consumers don’t like forking out significant portions of their income to pay for gas and utilities. Let’s be honest, no one likes paying for gas, not even you. When oil prices are high, consumers will spend more of their money on alternative sources of energy, such as the ones that were mentioned above. This allows oil alternative providers to raise their prices since there’s a greater demand for them.
Now that oil prices have plummeted, you’ll probably notice that many of these oil alternative companies’ stock prices have followed suit. Consumers are enjoying their cheap gas prices, and they’ve no reason to use biofuels and install solar panels on their roof. The value of these companies then proceeds to be diminished.
#2 Hybrid vehicles
Hybrid vehicles are essentially vehicles that have the uncanny ability of running on two different sources of energy: electricity or gas. Sales of these cars are expected to slow down in response to the crash in oil prices, which can be attributed to consumer behavior. But since the majority of carmakers have plenty of other skews, they shouldn’t be taking a serious hit. Only the ones who are completely wired into producing hybrid vehicles are expected to feel the pinch.
Until oil prices recover, listed companies from these two industries are expected to falter under the pressure.