What happened
Shares of Chinese electric car company Nio (NYSE: NIO) raced out of the gate Monday and as of 10:30 a.m. ET were up 4.3%.
Oil is the reason.
Image source: Getty Images.
So what
As OilPrice.com reports this morning, the cost of a barrel of WTI crude jumped 3% to more than $119 on Monday, up 29.5% since the day before active conflict broke out in Eastern Europe. Brent crude is up even more, rising 4.5% to over $123 a barrel and up more than 31% since Feb. 23.
What does the price of oil have to do with the value of a Chinese electric car stock? As oil prices rise, so will the cost of gasoline -- and the cost of owning a car powered by an internal combustion engine. According to data from GasBuddy.com, prices already average well over $5 per gallon (for regular unleaded) in California, and are getting there in Hawaii. In the Northeast, prices over $4 are getting pretty common, and in the Midwest, nearly so.
Now what
And in China, GlobalPetrolPrices.com was already quoting per-gallon prices in excess of $5 back in late February. When you consider that the price of oil has jumped more than 25% since then, it stands to reason that Chinese car owners who don't own Nios might now be paying in excess of $6 a gallon for gas.
The longer this trend continues, and the higher the price of gas goes, the better this will be for electric car companies like Nio. The fact that its stock price is rising today therefore makes an awful lot of sense.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends NIO Inc. The Motley Fool has a disclosure policy.
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