Higher Prices at the Gas Pump Are Coming...
Gas prices soared last summer – with the national average topping $5 per gallon on June 14, 2022. Consumers saw some relief into the end of last year. But now, prices are rising once again.
And it looks like that trend is likely to continue...
Yesterday, two OPEC+ leaders announced plans related to oil-production cuts. So let's talk about what that means for consumers and oil producers.
Headline No. 1:
Saudi Arabia extended its oil-output cut.
McCall's Call: Saudi Arabia said that it will extend its voluntary oil-production cut of 1 million barrels per day ("bpd") of oil through September. It also indicated it could extend it further... and increase the amount of oil cut.
This news puts its September production at roughly 9 million bpd – down from more than 11 million bpd at this time last year. The country said this will support the balance and stability of the oil markets.
Shortly after, Russia announced that it will also curb oil exports by 300,000 bpd next month.
Both of these countries are members or allies of OPEC. The entire group – OPEC+ – produces about 40% of the world's crude oil.
And all of these cuts come with gasoline prices already rising in the United States.
Take a look at the chart below. The average price of a gallon of gasoline bottomed at $3.10 last December. Since then, prices have steadily moved higher and are now sitting at $3.82. That's a 23% increase.
So prices at the pump are already rising. And these production cuts mean the trend will likely continue.
Now, it shouldn't come as a surprise that these are moves to increase the price of oil – regardless of what Saudi Arabia and Russia say. Higher prices equal higher revenue from their oil sales. And that will give these countries flexibility to boost production again if prices keep moving higher.
This isn't great news for the consumer. But it's good for other oil producers...
The chart below shows the Energy Select Sector SPDR Fund (XLE), which holds a basket of 23 stocks in the oil and gas industry. It has underperformed the market this year – up less than 2%, while the S&P 500 Index is up 18%.
I like the odds of the energy sector staging a comeback into the end of this year. Crude oil prices are up 17% in the past month alone. And this recent news could be another catalyst to keep the trend moving higher.
That makes now a great time to have exposure to oil stocks in your portfolio.
Headline No. 2:
China's electric-vehicle ("EV") deliveries soared in July.
McCall's Call: Regular readers know I'm a big believer in the future of transportation – especially EVs. They're gaining mainstream adoption and could reach 30% of all U.S. vehicle sales by the end of the decade.
I enjoy highlighting the progress that EVs have made in the U.S. – it's our home market. But China is way ahead of us when it comes to EVs.
And right now, its market is on fire...
Three of the country's largest EV makers recently released their latest delivery numbers. Combined, NIO (NIO), Li Auto (LI), and XPeng (XPEV) delivered a record 65,604 vehicles in July.
That's up more than 100% from July 2022 and about 25% from the previous record set in June.
Approximately 2.5 million EVs have been sold in China so far this year. That's up 30% from 2022. Li Auto and NIO in particular have posted big year-over-year increases in their deliveries – up 145% and 23%, respectively.
This is important because China is the bellwether of the EV industry.
The country accounts for more than half of all EVs sold globally. And by the end of this year, they're expected to make up 40% of all car sales in the country.
Individual stocks have performed well, too. NIO is up more than 55% in 2023 while Li has gained 128%. XPeng is sitting right around a double.
Overall, there are a lot of positive signs in the EV sector right now. Sales are increasing, and traditional auto companies continue to invest billions of dollars to build out capacity to boost their EV production.
Believe it or not, we're still in the early days of this shift. And that means there's still plenty of time to gain exposure in your own portfolio.
If you're looking for a place to start, I've already started building a basket of EV stocks for my McCall Report subscribers. I expect these stocks to soar as EV adoption takes off.
And my team and I recently added a new stock to this portfolio...
It's not a company you initially think of when it comes to EVs. But without its products, these cars simply cannot run.
The stock is up double digits since we added it to our portfolio. And this is only the start of what's ahead.
Click here to learn more about The McCall Report... and find out how to gain instant access to all of my favorite ways to play what I call the "Transportation 2.0" megatrend.
Here's to the future,
Matt McCall
Editor, Daily Insight
August 4, 2023
Did You Miss My Latest Podcast?
The S&P 500 saw its first 1% pullback in more than two months on Wednesday. While that headline may sound negative, historical trends indicate that this is actually a long-term positive. On this episode of Making Money With Matt McCall, I break down the recent action with one of the best in the business – the Carson Group's chief market strategist, Ryan Detrick.
Ryan and I jump right into our discussion of the latest pullback action and the news surrounding the U.S.'s credit downgrade. Things certainly aren't perfect out there right now... But Ryan remains bullish on stocks long term – as do I. In fact, we think that the economy is much stronger than many might think. So don't let the pessimistic headlines fool you. Tune in to get all the details.