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Shorting Oil, Hedging Tesla

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China's diesel demand has peaked, gasoline to peak 2025: CNPC research | Reuters

In China, the research arm of CNPC is projecting that diesel demand has already peaked. Moreover, they project that gasoline demand will peak by 2025 and crude demand by 2030. The government is pressing to replace 20% of the heavy-duty diesel fleet with lower emissions vehicles. Natural gas figures into this; however, electric buses and electric trucks are coming on fast.

In Germany news like this will hit like a bombshell: Porsche just announced they are not doing Diesels any longer.

Reaktion auf Abgasskandal: Porsche steigt bei Diesel aus - SPIEGEL ONLINE - Mobilität

Of course, many folks will rationalise this and say that a true Porsche should never have had a Diesel engine etc. But if cities start to outright ban Diesel cars and "real players" like Porsche nope out of the Diesel, I think the technology is done and dead. Even in Diesel countries like Germany.

Porsche internally, this seems to mark a huge mindset shift: in the past Porsche & every European car maker told their legislators that Diesels are required to meet CO2 emission targets - in fact, you could argue the very reason Porsche started to offer Diesel cars was to achieve fleet emission standards in their Cayennes... Porsche - not really famous for underperforming econoboxes - seems to be of the opinion that it is easier to meet emission targets with electrics than with Diesels. Environmental groups will use this admission to push for even tighter and even more stringent emission legislation...

Of course Diesel consumption is driven by buses, trucks etc. and not Porsches - but I think news like this might accelerate the demise of Diesel overall. There is not a sane public official in the world who would want their picture next to a new Diesel bus they just bought for their already polluted city!
 
[Knowing nothing about oil markets]

What's the deal with the highly elevated volume figures for Brent over the past few months and WTI the last few weeks?

Does futures trading sit mostly idle for months or even years until buyers feel an extreme need to hedge?

Is this 3x or even 4x activity a general indication of a pending downswing?
 
[Knowing nothing about oil markets]

What's the deal with the highly elevated volume figures for Brent over the past few months and WTI the last few weeks?

Does futures trading sit mostly idle for months or even years until buyers feel an extreme need to hedge?

Is this 3x or even 4x activity a general indication of a pending downswing?
Hmm backwardations is pretty steep for WTI

Nov 2018 $72.13
Dec 2018 $71.69
Jun 2019 $69.99
Dec 2019 $67.98
Jun 2020 $65.86
Dec 2020 $63.86
Dec 2021 $60.58
Dec 2022 $58.49
Dec 2023 $56.90
Dec 2024 $56.23
Dec 2025 $56.02

So the futures curve is falling about $1 per quarter. This suggests that the supply may be tight right now, but is expected to be less tight several years out. This is not to say that the price of oil will be under $64 in about two years. The point of the backwardation is that speculators are induced to buy at future at a low price under the expectation that it's value will increase as time rolls forward. For example, a speculator could by a Dec 2020 for $64 and wait for it to increase to maybe $72 or higher over the next two years. Producers of course need speculators to make this bet so that they can hedge production to a modest degree.
 
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Every minor hiccup that could hinder oil supply is front page news these days, but not surprisingly there's not a peep about this....

Maduro Looks To China For A Bailout | OilPrice.com

Venezuela just sold off some portion of their state production to China and likely made major deals on infrastructure and gov't funding. On energy, China can now:

  • Tank US fracking by doubling(or tripling) Venezuelan production.
  • Take up any embargoed capacity from Iran.
  • Further accelerate domestic renewables and EVs to crush global car manufacturers and oil interests [while saving money].
  • Sell(or stop buying) US treasuries, raising rates and dealing the death blow to most frackers.

How large is their strategic reserve, 1.3B barrels? China is going to pivot this silly trade war into an energy and finance battle that ends with US rates through the roof and our domestic energy sector in shambles.

Global recession. Yay!
 
  • Tank US fracking by doubling(or tripling) Venezuelan production.
I would love to see China try to invest in Venezuelan infrastructure to double or triple oil production. The geology isn't Saudi Arabia. Or even Russia.

It would not even pay for repression of Chinese Muslims in the Chinese Far West on top of the Surveillance State in Tibet.

It would absolute crash the Chinese Economy. But hey, the wise technocratic Chinese leadership is full of science and engineering degrees.
 
With all this talk about Brent going to $100 (whatever happened to $90?), I do think it is good time for car buyers to start holding back on their next new gasmobile. We don't have the EV supply to replace them just yet, but a smaller ICE fleet can be replaced more quickly than a larger one.
 
FCA and Jaguar will be among the first I think. Volvo was a candidate but since acquired by Geely they look much better.

My own personal candidate, that might not be the first to go, but they're bigger than trivial (Ferrari et. al.), but smaller than the big boys, and whose product lineup is being directly attacked by Tesla up and down the line, is Porsche. Of course they're part of the bigger VW group so they won't simply go bankrupt, and there is history and brand value in the name, so they'll live on longer than others.

But for seeing the most dramatic impact of Tesla on competitors, Porsche is the one I'm watching (product lineup most directly attacked, much closer in size based on units and revenue to Tesla than most of the others).

I realize that the Porsche sports cars really aren't being competed with directly, but Porsche has grown out of its sports car niche. It becomes a much smaller company if it gets stuffed back into that box.
 
FCA and Jaguar will be among the first I think. Volvo was a candidate but since acquired by Geely they look much better.

Jaguar is part of Jaguar Land Rover which is a wholly owned subsidiary of Tata Motors which is a wholly owned subsidiary of Tata Group.

Tata Group is too big to fail in India.

Hence Jaguar isn't going bankrupt.
 
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Can someone explain to me how gas prices can be down nearly 10 cents across South Jersey over the last 3 weeks?

I've certainly seen pump prices stay flat with swings in the oil markets, but to drift down so much while WTI has skyrocketed struck me as......weird.

Could there be that significant of an oversupply? Aren't we in or nearing a maintenance cycle?
 
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