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Gas prices

Discussion in 'TSLA Investor Discussions' started by evp, Dec 31, 2014.

  1. evp

    evp Nerd

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  2. chickensevil

    chickensevil Active Member

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    Except their "cheap" price simply means it only costs around 30$ for a tank instead of 60-70$... Now that seems amazing until you realize that with the average price of electricity at .11/kWh that equates to around .04 a mile which means from empty to full you pay 10.60$. Someone in my state would actually pay half that at around 5.40$ and someone using superchargers or otherwise is getting their power for free pays nothing. So yeah, their price war has nothing on the cost of electricity. By last estimation the price of premium fuel would have to drop to something crazy like .60$ a gallon to see a real cost parity.
     
  3. Robert.Boston

    Robert.Boston Model S VIN P01536

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    And pumping gas in the middle of winter is just as unpleasant as ever. The gasoline price drop seems to be hurting sales of hybrids, though, showing just how myopic consumers tend to be.
     
  4. jhm

    jhm Active Member

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    Another key point is that gas and oil prices are highly volatile, but the price of electricity is always low and has low volatility. You really don't know if a year from now you'll be spending $100 per month on gas or $250. It's a roll of the dice that depends things like games Saudia Arabia might play or the outbreak of war in an oil producing country. If you want your monthly expenses to be tied to events completely beyond your control, fine, but if your monthly electricity cost for an EV is say $40 tody, next year it should remain under $42.

    Not only is the low volatility of EV charging costs good for personal finances, it may prove beneficial for macro economics as well. Discretionary income is largely short on oil. So rising oil prices displaces discretionary consumer spending, which in turn hurts the general economy. I believe oil shock way contributor to global recession in 2008. The whole global economy is currently held hostage to oil price volatility. But plug in vehicles force transportation fuels to compete with all other energy sources in the electricity markets. As EVs become increasingly available energy arbitrage from the electricity market will put bounds on how high the price of oil can go and reduce the macro impact when prices are too high. Thus both the volatility of oil will come down and the economy will become increasingly robust to oil shocks. The fact that tody you can power your EV for less on electricity than a comparable gas car is an indication that arbitrage exists between the transportation fuel and electricity markets. This arbitrage exists because there are too few EVs and the price of battery drivetrains exceed gas drivetrains. As Tesla drives down the cost of batteries and expands the supply this will move toward closing this arbitrage. In the long run, the cost of fueling a gas car must come down to meet the cost of charging an EV. This may take several decades to realize, but it will happen. So long run, the price of gas must drop below $1/gal or oil below $25/bbl. And the global economy will be much more robust because of EVs.
     
  5. bluenation

    bluenation Member

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    this cartoon is funny, as it reminds me of the opposite reaction from the majority of redditors at r/cars....

    they're just bowled over that SUV and pickup sales are shooting up, as it seems the ignorant masses don't understand how temporary these 'low gas prices' really are.

    some people appear unable to see more than the very short term future...
     
  6. RubberToe

    RubberToe Supporting the greater good

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    Those people are called politicians :smile:

    RT
     
  7. adiggs

    adiggs Active Member

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    There is at least one hypothesis / theory around that would lead to two surprising outcomes over the next several years - that being low oil prices and the associated low exploration for new oil fields and wells.

    That hypothesis is a different take on peak oil - that we've reached peak demand for oil, and that as more efficient vehicles and alternative fuel vehicles hit the streets, that demand will keep shrinking until we suddenly realize with certainty that we won't be pumping all of the oil that we know about right now out of the ground and burning it.

    If you're an oil & gas executive today and you believe that will happen, then the correct financial conclusion is two-fold. Cut back on the more speculative exploration efforts, and on new sources that will be expensive to exploit (Canadian oil sands comes to mind), while simultaneously pumping oil from the wells that are already producing as fast as you have a buyer for that oil. Because when the music stops, whoever still has oil in the ground won't have a buyer for it, and that economic asset will suddenly be without value.

    I don't actually know that this is what's going on in decision maker's heads, but it's one explanation for Saudi Arabia's behavior that makes more sense to me than alternative explanations, as it is internally consistent and doesn't need any other than self-motivation to explain what they're doing.

    And to the degree that this view of the world takes hold in other oil producing companies and nations, everybody with an oil well that costs little to operate (marginal cost of a bbl of oil is low) will keep on running it. I can see oil going a lot lower from here.


    And low oil & gas prices does bring out the SUV and pickup buyers.
     
  8. Cosmacelf

    Cosmacelf Active Member

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    That's an interesting explanation. We should check world oil and gas consumption and see where the trends are. I do think that in the first world countries, we will at least see oil and gas consumption plateau. There is lots of consumption growth yet to be had in the third world countries though, and India and China aren't exactly small.

    The conventional explanation is that US fracking, as well as extra supply from places like Iraq is increasing worldwide supply, while Europe and China(!) seem to be heading for an economic slowdown, thus depressing demand. I don't think we're at the stage yet where we have a long term worldwide demand slowdown...
     
  9. bluenation

    bluenation Member

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    i dont see how ppl can believe we're near peak oil demand when emerging countries like INdia, China and much much more are using more oil than ever.

    but peak supply of oil? yep, i believe that. and it's gotta be ugly.

    in terms of SA trying to sell all its oil for those reasons....i'd believe that if the country had something other than oil to base their economy on...but i dont see it. without oil, the vast majority of OPEC quite literally has nothing else.

    i mean, im literally trying to think of an OPEC country that has its **** together...
     
  10. Theshadows

    Theshadows Active Member

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    Maybe SA is trying to sell all of it because they see the writing on the wall with the climate issues and when the shift happens to people wanting it to stay in the ground their wealth might begin to dissipate.
     
  11. Brass Guy

    Brass Guy Member

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    I just need to make one correction. Our electricity prices just went up by 37% in November. I was hoping it was just the distribution, but no; the whole bill. 23.5/kWh. I know eventually gas will go back up, but I can drive a gas car for less than the Tesla now. So you can't count on electricity prices to be that stable either. I do not expect it to come back down.
     
  12. Theshadows

    Theshadows Active Member

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    We pay .10/KWh and gas would have to be .60 or less for our smaller car (328xi) we traded to break even. Even at your rates we would have to have gas down to 1.40 to break even. Had our trade in been a closer sized and performing car (the 550i we looked at but didn't get) 1.10 would be the break even at your KWh rate. And that's not taking oil changes, and emission stickers into consideration.

    I did the math on our old car, the emission sticker and oil changes I saved in the 25k miles and one year I have owned the Tesla got me 13,000 miles if I paid for the electric. Probably 5k miles in our car are supercharger and other free charging stations.

    Plus installing solar will stabilize your costs too. Our house is 100% solar powered. However with our car we have to buy electricity again. Hoping to add more solar this year though and fix that.
     
  13. jhm

    jhm Active Member

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    Wow, that is an awful price for electricity. Do you have any option for rooftop solar?
     
  14. mkjayakumar

    mkjayakumar Active Member

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    UAE has tourism as the 2nd major source of revenue generation, but then again I am not so sure if tourism can thrive once the oil fueled money runs out.
     
  15. jhm

    jhm Active Member

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    Let's be clear about parity pricing for electricity and gasoline. The Model S uses about 0.32 kWh per mile and is comparable to gas vehicles which get around 20 MPG. Thus, 6.4 kWh (= 20 × 0.32) is at parity with 1 gallon of gas. So if your cost of electricity is $0.235 per kWh, the parity price for gasoline is $1.504 per gallon.

    Many ratepayers have access to electricity at $0.12 or less (and in many places rooftop solar CA provide this), which has parity with gas at $0.768 per gallon.

    Put another way, gas in my neighborhood is currenly $2.499. The parity electricity price would be $0.39 per kWh. If Georgia Power were to charge rates like that rooftop solar would go up so fast in Georgia that they would go bankrupt within a year or two.
     
  16. chickensevil

    chickensevil Active Member

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    The only point of correction I would make JHM on your 320wh/mi number is that may change depending on the person's driving habits and which car they have. For some that number is high (like myself) and for some that number is low. However, if you don't care to figure out what you are getting on a wh/mi basis for the month then the 320 number is a pretty nice middle ground.

    The only thing I would ask is where you got the "comparable to... 20MPG" number from? Is this just based on the class of car, or was this some other data point? I don't contest the number just curious because I usually make the comparison against a 23MPG (Since if I am not mistaken that is the current MPG of a standard MB S-Class) car or sometimes if I am feeling rather generous 25MPG or even 30MPG.

    Now every be jealous because without even having solar on my house (I can't install even if I wanted to... stupid condo rules...) I get $.056/kWh! (TOU billing during super off-peak is the best!)
     
  17. Robert.Boston

    Robert.Boston Model S VIN P01536

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    The electricity price increase in New England is driven by the very high electricity prices from last year during the Polar Vortex. (Retail prices are locked in by annual auctions, and forward markets were pricing 2015 winter power with a strong memory of the 2014 prices.) 2014 prices were high because (a) oil prices were high, and oil distillates are used as the marginal fuel in New England, and (b) natural gas supply is constrained by inadequate pipeline connections to New York. Cause (a) is being rectified by the Saudis. Cause (b) is being rectified by planned pipeline upgrades, albeit not for a few years yet. So, I do think we'll see New England power prices return to more usual levels.
     
  18. LMB

    LMB Member

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    My take is that low oil prices are aimed primarily at hurting Russia for its recent behavior in Ukraine and secondarily at lowering investment in oil exploration and development. The first is pretty clearly a US/NATO aim and the second is a benefit for Middle Eastern oil producers, the only ones who make much money at current prices and don't have an incentive to explore unconventional reserves.
     
  19. sublimaze1

    sublimaze1 8Dec2012 / Leeroy Jenkins

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    Certainly all these points are valid and of interest - but I (for one) purchased my Tesla because of the forward thinking, innovation and technology. Irrespective of the gas prices (which will rise again, for sure) the ability to conveniently drive on electricity without restrictions* is conmforting for me and reassuring that I made the right decision, as we all did.
     
  20. jhm

    jhm Active Member

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    Wow, so basically the limited NG pipeline capacity exposes New England utilities to volatility in the oil market. But there is a lag induced by forward contracts that puts them currently high at a time when has recently dropped. It sounds like the utilities are doing a poor job at hedging their exposure to oil. Of course, if they can simply push off the cost of a poor hedge onto ratepayers, they may have little incentive to do otherwise. Do you think this could be an opportunity for rooftop solar and other distributed power to step in?
     

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