Wednesday, July 02, 2008

Cars and Oil
The oil companies and the auto industry are clearly moving in opposite directions. Oil hits new highs every day and GM is at lows not seen since the 1950s, and today closed below $10 per share. Exxon is near historic highs. Here is a chart showing the two stocks, GM since 1962 and Exxon since 1970:

You need to look no further than the period from 2000 to 2008 to know the interests of the auto makers and the oil companies are no long aligned. Ultimately this will be good for consumer and the auto makers. The United States is a car country, and Americans are going to drive cars. We will adapt to electric, hydrogen or whatever technology powers our cars. GM is leading the way with its new Volt. GM leading in a new technology seems surprising giving GM's stodgy reputation, but not when it's viewed in terms of its survival. I would not be shocked to see a reversal of recent stock performance - GM up and Exxon down - as viable car technology weans us off our reliance on oil. Of course GM has to survive for this to happen.

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