This week crude oil prices dropped to US$24.01 a barrel–a low not seen since the 1990s. According to the Organization of the Petroleum Exporting Countries, the price is being driven down by Saudi Arabia and Russia. Russia and Saudi Arabia have ramped-up production, despite the decreased opportunity for profit.
In Canada, low prices are particularly disastrous for Alberta’s petroleum sector. Prime Minister Justin Trudeau indicated that the situation would exacerbate the economic woes facing Canadians during the Coronavirus outbreak.
“It’s a sector that has been particularly hard-hit and we will look for further help to be able to support people as they get through,” the PM said.
The impacts of the low gas prices may be felt just as strongly further east, where Canada’s green economy may struggle to gain increases in market share.
With gas currently averaging below US$0.70 at the pump, drivers of new vehicles may be less inclined to purchase an EV or hybrid vehicle. Whether this impact will be seen may depend on the consumer’s mood after car dealerships resume normal operations.
Toyota’s Tea Leaves
While it is not yet known what effect governmental calls for social isolation will have on vehicle sales, the tealeaves are not optimistic for manufacturers.
Toyota expects to see sales drop by 80 percent in Canada during the Coronavirus pandemic. In response curb its domestic production by closing factories across Ontario for at least two weeks.
The company wrote a letter to the 8,500 which said: “This action is being taken due to the increasing social and economic impact of the COVID-19 virus.” stated a letter from Toyota to its workers.
While dealerships may be seeing mammoth declines in vehicle sales, one online vehicle merchant is reaping the rewards of not requiring any showrooms to operate.
In the ten days after news broke that it had reached a deal with Ally Financial, Carvana’s stock was driven up by more than 56 percent– from $29.35 U.S.-per-share to US$52.95.
The rises follow significant losses seen across the automotive sector since mid-February. At its peak on February 20, Carvana was trading at more than US$110.
In 2019, Carvana stock rose by more than 180 percent. The previous year also saw its stock price rise more than 70 percent over 2017 prices.