Elon Musk
Frederic J. Brown/AFP via Getty Images
Tesla CEO Elon Musk has taken a surprising stance. He recommended increasing oil production to ease prices.
Musk has built his electric-vehicle company, Tesla (ticker: TSLA), partly to wean the world off fossil fuels and create an economy based on sustainable, renewable energy. But he tweeted Friday that “extraordinary times demand extraordinary measures,” adding that while falling energy prices can impact demand for EVs, “hate to say it, but we need to increase oil and gas output immediately.”
Oil prices have soared as economic sanctions and war threaten Russian oil supplies, sending waves through the global energy market. Benchmark U.S. crude oil prices closed above $115 a barrel Friday, rising 26% for the week.
Rising oil prices have hit consumers at the pump. U.S. average gasoline prices topped $4 a gallon this past week for the first time since 2012.
High gas prices, at the margin, make EVs more attractive than traditional gas-powered vehicles. EVs are more expensive up front. Rechargeable batteries and electric motors still cost more than an engine, transmission and gas tank. But an EV takes roughly $10 to “fill up” based on current electricity prices. A similar amount of driving range in a comparable traditional car can cost more than $50.
Tesla stock closed up 3.5% the past week as oil soared and the rest of the market slumped. The S&P 500 and Dow Jones Industrial Average both dropped 1.3%. Rising energy prices were part of the story helping Tesla stock in recent days, but so was news that the company’s new German car production facility received required government permits to start production.
Musk’s energy tweets have drawn more than 25,000 comments. Some disagreed with his stance. The CEO, however, appears to believe that, at least in the short run, the U.S. needs both more oil and more sustainable energy investment. “Sustainable energy solutions simply cannot react instantaneously to make up for Russian oil & gas exports,” added Musk.
Tesla didn’t immediately respond to a request for comment about Musk’s comments.
It isn’t easy for oil producers to simply pump more. Increasing oil output requires capital investment, just like adding wind or solar power generation capacity. RBC head of commodity strategy Helima Croft told Barron’s Jack Hough recently that the central banker of oil remains Saudi Arabia. That is the country with spare pumping capacity.
Write to Al Root at [email protected]
