Shorting Oil, Hedging Tesla

[ValueAnalyst]

Shale oil is too light (i.e. high API) to be useful for US refineries, which are geared for heavy crude. I expect light crude oil exports from the US to other parts of the world to remain high throughout the summer, leading to accelerating draws in US crude oil inventories as seasonality turns.

 

[Sean Wagner]

Well looky here! It's one of those "fossil fuels are so big in primary units that tiny ole renewables can possibly make a dent" articles.

It's timely then to point out yesterday's remarkable California independent System Operator [CAISO] pie chart:

Now if CA could only unleash its potential for offshore wind and somewhat close the gap with TX...

 

[RobStark]

Plans for Ohio's Only New Coal Plant Are Scrapped

 

[jhm]

Plans for Ohio's Only New Coal Plant Are Scrapped

"Coal helps diversify the grid." That's a good one.

 

[jhm]

Yesterday, I shared the energy flow diagrams with my 13-year-old daughter. She did a really great job figuring out how it all worked and being able to appreciate how things have been changing. So saw how rapidly wind and solar were growing and displacing coal and natural gas. She thought nuclear should grow a lot more, but then she looked back 2011 and saw that nuclear simply was not growing.

She's also told her mother and me that she wants to work for SpaceX some day and work on the challenges of colonizing mars. She wants to be a programmer, but had questions about the best course of study to prepare for SpaceX. I recommended robotics. I think she has strong orientation for systems thinking. We'll see. It's a good dream.

 

[ValueAnalyst]

It's timely then to point out yesterday's remarkable California independent System Operator [CAISO] pie chart:

View attachment 302429

Now if CA could only unleash its potential for offshore wind and somewhat close the gap with TX...

Looks like CA can start exporting renewable energy by 2020.

 

[Reciprocity]

GM will equip big '19 pickups with I-4 turbo in mpg battle vs. Ford, Ram

GM is doubling the number of engines available on the retooled 2019 Chevrolet Silverado and GMC Sierra, including a new four-cylinder turbocharged engine that can run on two cylinders to increase fuel economy. The 2.7-liter I-4 turbo engine is a major milestone for the company

Is this because of regulatory pressure or demand? Do customers demand better fuel economy or is it EPA related. If it's demand, then a Tesla pickup is going to do smashingly. Hybrid cars are great and all but so many sacrifices. Same with these tiny turbos. Lack of towing and hauling torque and lack of any real muscle. This is fine for a work truck, but those buying $50k pickups want some muscle too.

 

[gora321]

And the winner is...

 

[jhm]

And the winner is...

Wow, nuclear really tipped up in cost, $148/MWh. With wind and solar at $45 and $50 per MWh, new nuclear is now 3X as expensive. At that sort of price differential you can afford a lot of curtailment and storage for wind and solar and still beat nuclear. Even without storage, suppose you needed the same daily output through the year and we willing to throw away any surplus power generated. You could throw away 66% of the annual production and still beat nuclear. But of course you could do better than just throwing away power by running electrolyzers on the surplus power. I think this shows why nuclear at these cost levels is simply out of the running for deep decarbonization. Massive oversupply of renewables is cheaper.

Also it looks like solar will be cheaper than wind in a year or two. I think this will change the market. For example, if you're building out a wind farm and the land allows for it, it will be quite compelling to add solar to the installation. It will only improve the economics when solar is cheaper than wind. Also if you've got wind and solar in the same farm, why not add a little battery storage to it to smooth out the supply? This WSB hybrid plant will be very competitive with baseload. So I think in a few years this will be pretty standard and will take baseload gas out of the new generation market.

 

[jhm]

Natural gas expected to remain most-consumed fuel in the U.S. industrial sector - Today in Energy - U.S. Energy Information Administration (EIA)

This has some helpful information for understanding the use of energy in the industrial sector. Note that this sector included processing natural gas and liquefying it to be LNG. So in some respects the end-user demand for natural gas here are overstated, that is, the true end-user of LNG is just a gas user elsewhere, LNG just being an intermediate product.

Key issue is that 2/3 of energy consumed by industry is used for heat and local power generation. This is critical to understand because local solar, wind, batteries, and simple grid power can over time potentially displace a lot of fuels combusted for heat and power. I suppose the other 1/3 is used as feedstock for chemicals (including LNG, other fuels).

It's a bit odd that the EIA assumes that the same fraction of heat and power will be supplied by natural gas going out to 2050. They rationalize this in terms of switching costs which are valid. However, they see demand growing, but the switching cost argument does not apply to new industrial capacity. For example, Gigafactory 1 did not have to be built to use natural gas as a prior generation of industrial plant have done. Tesla began with a blank slate building out an all new plant.

So what is critical hear is that energy analyst again are forecasting demand for natural gas and petroleum within the industrial sector in a way that greatly ignores inroads that renewables may make in the coming years and decades. What really is all this petrochemical demand? It seems a big chunk of it is just local heat and power, which renewables can quite ably supply.

 

[Dave EV]

Looks like CA can start exporting renewable energy by 2020.

CA is ready today. In fact, we've already been exporting excess solar east to states like Arizona, but unfortunately we don't appear to be making any significant money off it and may be losing money on it depending on whom you ask.

CA has already curtailed 263 GWh of wind/solar power so far this year - that's an average of about 80 MW 24/7. Not a huge amount of energy (I'm guessing around 0.1% of total energy consumption by the state so far this year), but this will rapidly grow as more wind/solar is added to the grid.

CAISO is already working on agreements with neighboring grids to allow more flexibility with balanding supply/demand and maximizing the amount of renewable energy on the grid.

 

[RobStark]

Is this because of regulatory pressure or demand?

1) I think it matters to fleet buyers who look at TCO.

2) Truck companies love advertising base engine EPA MPG then selling higher horsepower engines.

3) Like many things it is a combination of demand and regulatory pressure. When you can advertise a high fuel economy base engine with 310 horsepower and 348 ft lbs of torque it will move the sales needle.

 

[jhm]

$80 Oil Could Kill Smaller Airlines | OilPrice.com

Here is another signal of distress at Brent approaches $80. Airlines take about a year to adjust to increases in fuel prices. Jet fuel is up 54% over prior year. This can impact airlines that are not well hedged.

I suppose, as distressed airlines pull back on the number of flights offered, this cuts into demand for jet. After routes have consolidated around fewer competitors, the prices climb. After prices have adjust, the flying public pulls back on flying. So I can see how this would take a while for the full impact of a price increase to work out. Anyone have some insight into how airlines react to fuel price increases?

 

[gavine]

Anyone have some insight into how airlines react to fuel price increases?

They charge more fees after you buy the ticket. Seat fees, baggage fees, etc. Sell you the ticket and then shake you down.

 

[Sean Wagner]

Quote: Wind power poised for record year, despite initial tax law concerns

... There are now 33,449 MW of wind projects under construction or in advanced development in the U.S., a 40% increase from last year and the highest level since AWEA began compiling the metric at the beginning of 2016. ...

Source: Wind power poised for record year, despite initial tax law concerns

Those are projects that will be completed over the course of several years, but it's still a big number. Texas, the leader in US wind energy by far, has about 21 GW of max capacity installed.

And then there's this, quote:

In a world where wind and solar resources make up 40 to 50 percent of generation, wholesale energy prices will drop by as much as $16 per megawatt-hour, according to a study released Wednesday from a group of researchers at Lawrence Berkeley National Laboratory.

Source: If Solar and Wind Hit 50% of Generation, US Wholesale Energy Prices Could Fall 25% or More

However, the impact of storage is not taken into account, and should include EVs as generators of both demand and supply.

.

 

[Reciprocity]

1) I think it matters to fleet buyers who look at TCO.

2) Truck companies love advertising base engine EPA MPG then selling higher horsepower engines.

3) Like many things it is a combination of demand and regulatory pressure. When you can advertise a high fuel economy base engine with 310 horsepower and 348 ft lbs of torque it will move the sales needle.

That should be easy to beat. I can already picture a Tesla pickup towing a fully loaded semi, up a 4% grade because it can't get up the hill without help.

 

[dc_h]

So the China deal could increase LNG exports by 30 billion. Will that affect the price of gas here in the USA? I would expect a 50 cent or more impact, which helps our industry base, but also improves solar & winds price advantage. Wouldn’t it be ironic that the pro oil policy actually speeds solar and wind adoption in the USA?

 

[renim]

1) I think it matters to fleet buyers who look at TCO.

2) Truck companies love advertising base engine EPA MPG then selling higher horsepower engines.

3) Like many things it is a combination of demand and regulatory pressure. When you can advertise a high fuel economy base engine with 310 horsepower and 348 ft lbs of torque it will move the sales needle.

If it accelerates as stated, and costs less, it'll sell well.
turbo I4 should cost than outgoing V6. there is a market for both, i suspect the I4 will sell very well.

honestly if its greater 25mpg window sticker, the new full size pickup truck is more efficient than half the new cars being purchased anyway
Sustainable Worldwide Transportation - Sales-weighted fuel economy (window sticker)

and GM's new full size pickup truck it'll probably be more fuel efficient than 95% of america's oldest half of on road vehicles.

 

[jhm]

So the China deal could increase LNG exports by 30 billion. Will that affect the price of gas here in the USA? I would expect a 50 cent or more impact, which helps our industry base, but also improves solar & winds price advantage. Wouldn’t it be ironic that the pro oil policy actually speeds solar and wind adoption in the USA?

What are the volume units here? I wonder how much it is as a fraction of domestic consumption?

If it is big enough it can tighten up demand. Last year the price of gas was up a bit, and it lost share to coal in the power generation market. Natural gas to power declined about 7.5%.

So gas producers can chase LNG exports for higher prices, but they do run the risk of pricing gas out of the domestic power market.

 

[TheTalkingMule]

So gas producers can chase LNG exports for higher prices, but they do run the risk of pricing gas out of the domestic power market.

We should almost welcome LNG exports. Look what it did to Australia. A country awash in ultra-cheap methane saw their price double once exports really took off. Then what? They became the poster child for renewables+battery storage.