As the price of gas cruises past $4 a gallon, there remain significant concerns about the capacity of the economy to continue growing if gas prices continue to rise. However, with the rising middle class in India and China continuing to grow, it appears as though high gas prices are here to stay and should keep growing well into the future.
This doesn't seem to be good news on the surface. Rising gas prices, while bad for most, can create significant opportunity for others. The most obvious benefactors are oil and energy companies that find, capture, and refine the crude oil used to make gasoline, but there are others.
One theory on beneficiaries of high gas prices posits that, despite conventional wisdom, car companies could benefit from rising gas prices. On the one hand, this is rather specifically counter-intuitive. Higher gas prices mean people will have an economic incentive to drive less, meaning that people are less likely to need new cars or more likely to rely on mass transit. However, as the Wall Street Journal pointed out in June of 2008, the market trends created by rising gas prices could actually benefit the industry as a whole.
"For once we actually have viable alternatives and exciting technology that are really game changers," says Mike Jackson, chairman and chief executive officer of AutoNation Inc. "However, if the price of petroleum goes down … it undercuts the viability of new technology."
While Jackson said this four years ago, it appears as though the economic trends he predicted have been in action as American car makers like General Motors (GM) and Ford (F) have been offering more hybrid and electric models. It's clear that car companies need to change to move forward, and American manufacturers, long reliant on the sale of heavy SUVs and small trucks, could leverage the economic need created by higher gas prices to motivate the changes they need. What's more, the need for consumers to trade in older, less efficient models for newer hybrids and electric cars can create a new demand for new vehicles.
Internet Shopping Companies
Another opinion, this time coming from Marianna Bickle writing for Forbes, is that the impulse to drive less that comes from higher gas prices will clearly benefit the already clear trend towards online retail. The slow but certain push away from brick and mortar stores and towards online retailers has been well documented, but it's still likely to be decades before the shift really results in online retailers passing physical stores. This shift, though, as Bickle points out, could be significantly expedited by higher gas prices pushing consumers to stay at home and pinch pennies more. If the cost of traveling by car increases, it creates a twin-pronged demand to both spend less on consumer goods, and take advantage of online discounts, and to avoid driving to retail locations.
Rising gas prices could also offer clear economic benefit to green energy concerns. In many cases, green energy companies like First Solar (FSLR) and other solar companies are more reliant on increasing coal prices than anything else, attention paid to shifting away from fossil fuels in the automotive sector could just as easily help push broader economic trends. Even if solar continues to cost more than coal, greater consumer attention paid to energy sources might become a rising tide that raises all ships.
There are, however, some companies that could boast a more direct benefit if increasing gas prices push more American consumers towards green technology to avoid driving traditional cars. This could be very direct for companies related with the creation of hybrid and electric cars like Tesla Motors (TSLA). Thinking one step further, the makers of high-tech lithium ion batteries, like A123 Systems (AONE), for instance, could see benefits. What's more, if demand increases for the lithium ion batteries used in electric cars, that can create increased demand for certain commodities, like electrolytic manganese, and improve market conditions for the companies that produce them.
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