Economics for dummies: a monopoly is a firm that has no competitors in its industry. It reduces output to drive up prices and increase profits. Currently, OPEC is composed of several developing nations that include Africa, the Middle East, and South America. The largest free markets in the world, the United States and the European Union accounted for nearly 3/5s of the global domestic trade with a whopping $42 trillion combined. China, a developing nation who exported nearly $15 trillion last year during the Covid-19 pandemic, also wants a piece of the black gold. These trillions being made rely on oil to lubricate their profit generating machines.
The demand for used-vehicles correlates and is lagging petroleum. As legislation to decrease global emissions continue, the supply of oil will be decreased. Decreasing supply in a situation where the demand is booming is beneficial for electric vehicles as the only way to make it appealing for people to buy them is through making oil less desirable and expensive. Switching to gas saving vehicles could be beneficial to you.
The demand for oil is going through the roof. Despite of the crippled global economy, the price is currently around $86 per barrel of oil; after having a melt-down in price, which meant oil went negative. Oil is roaring back, and nothing will stop it. OPEC controls much of the supply for oil since their nations control most of the discovered oil reserves and usually exceed their agreed upon quotas. The United States utilizes West Texas Intermediate to determine their supply and demand, while the European Union relies on Brent Crude Oil prices to gauge prices.
Why do oil prices matter? Oil prices are a vital sign in forecasting economic health since its one of the driving forces that help propel the global economy. Oil’s sensitive and fluctuating prices can only mean one thing: extreme high demand. In April 2020, the unemployment rate in America reached 14.8%, today, its hanging around 4.8%. Despite the American economy still trying to breach the effects and influences of the global pandemic, can you imagine what will happen when the economy is back and roaring? One last thing, winter is coming.
Next thing to analyze is the sudden increase in new and used car prices. New car prices rallied 37% YoY last month in September, all whilst used car prices soared passed 40% due to a shortage of new cars. Unlike oil, whose supply is controlled by monopolies, car inventories are running low while the volume of demand is rising. Car prices are seasonal. The summer time usually sees the peak of it sales, while the winter time usually brings about receeding prices. Unfortunately, a new phenomenon which has affected other industries, has struck prices for suppliers and customers: supply shortages. This winter will be harsh, people looking to buy new cars will have to pay the premiums. By this upcoming spring, things could get worse. CarVanna, is an indicator of how car sales are off the charts.
The prices of oil correlates with new and used-car prices. If you know you will need a car or would like to upgrade your current one or even switch to a gas efficient one, the time was yesterday. Get in contact with us to not only save 30-40%, but gain the ability to own an appreciating asset instead of a depreciating one. Inventories will decrease and prices will keep rising, take the risk.
Oil stocks are testing resistance levels and holding support, this only means prices for oil will keep rising and car prices will follow suit. There is one caveat, car inventories are being strained, so if demand keeps rising, we are in for a treat. Contact us to learn how to capitalize in the solution to strained car inventories . The economy is roaring!
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