Oil price is falling again this morning, down to $44.9/b.
When China is ready to halt 1.2 mb/d SPR build, this oil market will collapse.
When China is ready to halt 1.2 mb/d SPR build, this oil market will collapse.
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Asian oil refiners cut output to fight oversupply, low margins | Reuters
And here it comes... Asia has a full inventory of oil products. Refinery margins are compressing. So Asian refiners will cut production for a few months.
And here it comes... Asia has a full inventory of oil products. Refinery margins are compressing. So Asian refiners will cut production for a few months.
Developing Nations’ Energy Intensity Down 40% Since 1990
Here's an interesting trend. Energy intensity is the ratio of energy consumption to GDP. Globally energy intensity has fallen 32% from 1990 to 2015, a 1.5% annual decline. For developed OECD countries the annual decline is about 1.3%, but for developing nonOECD countries the decline rate is even faster, about 2.0%. Declining energy intensity is a very good thing because it means any economy is making more productive use of energy.
It is interesting to think though what peak fossil energy means for energy intensity. Most renewable energy produces electricity directly. This is much more efficient than burning a fuel as primary energy to make electricity. Most power generation from fuels rejects about 2/3 of the primary energy as waste heat. So generating power from sunlight or wind bypass such energy loss as waste heat. As these sources of energy offset thermal generation, this will be a net decline in primary energy consumption. This directly reduces energy intensity without any loss of useful energy. Thus, the rise of renewables has the potential to accelerate the decline of energy intensity. Thus, we can get to a place post peak fossil use when energy consumption declines faster than real GDP growth. This is the decoupling of energy from the economy.
Here's an interesting trend. Energy intensity is the ratio of energy consumption to GDP. Globally energy intensity has fallen 32% from 1990 to 2015, a 1.5% annual decline. For developed OECD countries the annual decline is about 1.3%, but for developing nonOECD countries the decline rate is even faster, about 2.0%. Declining energy intensity is a very good thing because it means any economy is making more productive use of energy.
It is interesting to think though what peak fossil energy means for energy intensity. Most renewable energy produces electricity directly. This is much more efficient than burning a fuel as primary energy to make electricity. Most power generation from fuels rejects about 2/3 of the primary energy as waste heat. So generating power from sunlight or wind bypass such energy loss as waste heat. As these sources of energy offset thermal generation, this will be a net decline in primary energy consumption. This directly reduces energy intensity without any loss of useful energy. Thus, the rise of renewables has the potential to accelerate the decline of energy intensity. Thus, we can get to a place post peak fossil use when energy consumption declines faster than real GDP growth. This is the decoupling of energy from the economy.
adiggs
Well-Known Member
How low would he price of oil need to go, to stimulate the demand and decrease the supply, to resolve the logistical problems of having onshore storage mostly full, and tankers full of replacement stock already sitting around ready to unload?
I remember one of the articles you linked in the last month or two, talking about the effect on coal prices when people kept digging up coal and making big piles of the stuff, even when the price was too low to support the activity. The neat thing about coal is you CAN make a big pile of it - land is relatively cheap as a storage vehicle.
Oil tankers are NOT relatively cheap storage vehicles
I wonder - does the high utilization of oil tankers drive up the daily rate on the tankers (my first order assumption), or does the inability to sell the stuff on a tanker drive traders into bankruptcy, thereby leading to dramatic reduction in daily rates for the tankers? I think more of the former than the latter, but it also looks like a pretty big counterparty risk is developing for the shipping companies that own tankers (to my barely trained eye).
I think I'm more happy than ever that I'm divested from individual companies involved anywhere in the "pipeline" from exploration to delivery of oil.
The Fuel That May Halt The Electric Car Revolution | OilPrice.com
Okay, this author has some pretty bizarre ideas about Tesla, but the key issue is that natural gas can cut transportation fuel costs by 40% to 60% in most countries. The author fails to recognized just how dangerous that could be for the oil & gas industry.
Consider that in the US the fueling cost for an EV is about 3c/mile while with gasoline at $2.50, it is around 10c/mile. So natural gas can take this down to about 5c/mile. So at this level petroleum might remain competitive with EVs, but consider the cost. This wipes out about 50% of transportation fuel revenue across the petroleum industries from producers to refiners/processors to distribution and retail sales.
So I find it a bit silly to frame this as gas somehow putting a stop to EVs when that very solution entails wiping out about half of petroleum industry revenues and quite possible all of the profit. It's is a bit like proposing to amputate your whole leg to remove a wart on your toe. But, hey, if this makes oil investors feel good, who am I to judge?
The fundamental problem is that renewables are pushing coal and natural gas out of the power markets. The surplus gas needs to find its way into the transport fuel markets. As it does so, it will drive down the price of gasoline and diesel. This will squeeze refinery margins, and the price of crude must fall.
So we can envision a scenario wherein natural gas disrupts the transportation fuel market, even as EVs scale up to disrupt that same market. Recall that my working scenario is that about 25 million EVs are sold in 2025, and this coincides with the peak in oil demand. If natural gas powered vehicles were to keep pace with EVs such that we have 50 million EVs and NGVs combined in 2025, then oil demand would have peaked several years earlier, say 2023. Additionally, this EV+NGV scenario would help reduce GHG and other emissions even faster than EVs alone. Economically, it could be quite beneficial as well as the cost of transportation declines. The resistance to this scenario is primarily that the petroleum industry would collapse even faster. So there are lots of cronies who will want to preserve the status quo, even as EVs chip away at its foundations. But crisis in the natural gas market, as solar and batteries eject gas from the power markets, could turn this around. I don't think it would take much for automakers to switch production to NGVs. So demand can rise just as quickly as it wants to, but even here I think the key is fueling infrastructure. Does anybody really want to invest in this? Regardless, a crisis could reach a tipping point where new NGVs replace new strictly oil-based ICEVs in just a couple of years. A persistent LNG glut could be the trigger in some markets. Countries with ample LNG import capacity, but declining gas generator demand, could start feeding that LNG directly into transportation systems. The point here is that the shift could happen swiftly and with very little warning. If China or India were to make this switch, the price of oil would come crashing down pretty fast.
Does this make me worry about Tesla? Not really. The sooner gas exits the power markets, the better it will be for Tesla Energy, but that is another post.
Okay, this author has some pretty bizarre ideas about Tesla, but the key issue is that natural gas can cut transportation fuel costs by 40% to 60% in most countries. The author fails to recognized just how dangerous that could be for the oil & gas industry.
Consider that in the US the fueling cost for an EV is about 3c/mile while with gasoline at $2.50, it is around 10c/mile. So natural gas can take this down to about 5c/mile. So at this level petroleum might remain competitive with EVs, but consider the cost. This wipes out about 50% of transportation fuel revenue across the petroleum industries from producers to refiners/processors to distribution and retail sales.
So I find it a bit silly to frame this as gas somehow putting a stop to EVs when that very solution entails wiping out about half of petroleum industry revenues and quite possible all of the profit. It's is a bit like proposing to amputate your whole leg to remove a wart on your toe. But, hey, if this makes oil investors feel good, who am I to judge?
The fundamental problem is that renewables are pushing coal and natural gas out of the power markets. The surplus gas needs to find its way into the transport fuel markets. As it does so, it will drive down the price of gasoline and diesel. This will squeeze refinery margins, and the price of crude must fall.
So we can envision a scenario wherein natural gas disrupts the transportation fuel market, even as EVs scale up to disrupt that same market. Recall that my working scenario is that about 25 million EVs are sold in 2025, and this coincides with the peak in oil demand. If natural gas powered vehicles were to keep pace with EVs such that we have 50 million EVs and NGVs combined in 2025, then oil demand would have peaked several years earlier, say 2023. Additionally, this EV+NGV scenario would help reduce GHG and other emissions even faster than EVs alone. Economically, it could be quite beneficial as well as the cost of transportation declines. The resistance to this scenario is primarily that the petroleum industry would collapse even faster. So there are lots of cronies who will want to preserve the status quo, even as EVs chip away at its foundations. But crisis in the natural gas market, as solar and batteries eject gas from the power markets, could turn this around. I don't think it would take much for automakers to switch production to NGVs. So demand can rise just as quickly as it wants to, but even here I think the key is fueling infrastructure. Does anybody really want to invest in this? Regardless, a crisis could reach a tipping point where new NGVs replace new strictly oil-based ICEVs in just a couple of years. A persistent LNG glut could be the trigger in some markets. Countries with ample LNG import capacity, but declining gas generator demand, could start feeding that LNG directly into transportation systems. The point here is that the shift could happen swiftly and with very little warning. If China or India were to make this switch, the price of oil would come crashing down pretty fast.
Does this make me worry about Tesla? Not really. The sooner gas exits the power markets, the better it will be for Tesla Energy, but that is another post.
NG is already used as a transport fuel by buses. Unfortunately, the drivetrains have very low durability; they don't even last as long as the gasoline bus drivetrains or the diesel bus drivetrains. Battery-electric is clearly more economical.
I don't see NG occupying more than a niche in transport. The best hope for the NG market is that it remains popular for heating. This would be worth analyzing. It's surprisingly close to parity with electric heat pump technology, but it's still a bit cheaper in most areas... I haven't worked out the price points and efficiency points which would tilt one way or the other.
I don't see NG occupying more than a niche in transport. The best hope for the NG market is that it remains popular for heating. This would be worth analyzing. It's surprisingly close to parity with electric heat pump technology, but it's still a bit cheaper in most areas... I haven't worked out the price points and efficiency points which would tilt one way or the other.
I'm sure it is not a happy situation for tankers to just sit in port. Whether they sit full or empty probably makes little difference apart from the storage fees that can be earned if full. So the real problem is having less fuel to move.How low would he price of oil need to go, to stimulate the demand and decrease the supply, to resolve the logistical problems of having onshore storage mostly full, and tankers full of replacement stock already sitting around ready to unload?
I remember one of the articles you linked in the last month or two, talking about the effect on coal prices when people kept digging up coal and making big piles of the stuff, even when the price was too low to support the activity. The neat thing about coal is you CAN make a big pile of it - land is relatively cheap as a storage vehicle.
Oil tankers are NOT relatively cheap storage vehicles
I wonder - does the high utilization of oil tankers drive up the daily rate on the tankers (my first order assumption), or does the inability to sell the stuff on a tanker drive traders into bankruptcy, thereby leading to dramatic reduction in daily rates for the tankers? I think more of the former than the latter, but it also looks like a pretty big counterparty risk is developing for the shipping companies that own tankers (to my barely trained eye).
I think I'm more happy than ever that I'm divested from individual companies involved anywhere in the "pipeline" from exploration to delivery of oil.
Refiners are up to their eyeballs in product causing logistical headaches. So this is eroding their margins. In certain places, refiners will just have to back off on production and clear some finished inventory. If they do that, crude stock will rise.
If I recall correctly, before Tesla, JB Straubel worked on developing a gas turbine battery hybrid. This would be the way to go to get around durability and improve efficiency. But fundamentally, I've got to believe that the cronies just don't want much NG in transportation. So yeah, I do see this as largely limited to niche plays. But there could be some surprises along the way.
Heat pump parity is pretty important. This means that renewable electricity can keep pushing gas, propane and heating oil out of the heating markets, just as they are the power markets. One snag here is that solar production in the northern hemisphere is lowest in December and January. So installing enough solar and wind to cover electricity and seasonal heating will imply over generation for pretty much the rest of the year. So space heating from fossil fuels may not be such a bad thing for several decades. It becomes a toss up between burning more fossil fuels in power plants versus heating homes directly. Until renewables are about 80% of electricity consumption this is not much of an issue. New buildings, though, should go electric because longterm that is what will be needed.
And then there is this way to electrifying trucking...
EV’s Won’t Kill Diesel – Electric Highways Will | OilPrice.com
Perhaps this is the reason Musk has not been so keen on battery electric heavy trucks. It's pretty old technology, but it works.
EV’s Won’t Kill Diesel – Electric Highways Will | OilPrice.com
Perhaps this is the reason Musk has not been so keen on battery electric heavy trucks. It's pretty old technology, but it works.
adiggs
Well-Known Member
It seems to me that to some degree, as we think about a future renewable energy generation and consumption system, we are to some degree continuing to cast it in the fuel burning paradigm. In this sense - when burning fuel to generate electricity, where each incremental unit of fuel costs something (nontrivial), it doesn't make any sense to generate more electricity than will be consumed. We intentionally keep supply balanced to demand, because each increment of supply carries an incremental cost.
Renewables bring a new dynamic into the market. That dynamic being that if it's a particularly sunny day and I get 70 kwh from my solar panels instead of 65, the incremental 5 kwh are "free" (I didn't buy any extra fuel to burn, to create those extra 5). Whether there's a use for them somewhere or not.
At low % of grid, the paradigm shift isn't apparent, or even important.
Renewables also generate supply that is very much not synchronized with the demands of the moment. My point is that trying to balance them is part of a fuel paradigm - and maybe that's a paradigm we can start weaning ourselves from.
As a thought experiment, imagine 10-20 years from now that solar continues it's rapid decrease in cost to install. Cheaper and cheaper to install, and effectively free once installed, electricity. In this situation, I can imagine reaching a point where it makes sense to install enough panels for winter time consumption here in Oregon, knowing that I'll be over generating by 4-10x in the summer (or maybe more). But the power is so cheap, it's still cost effective for winter.
Elon and many others have talked about solar paint and solar roofs, where instead of panels, the paint, the roofing shingles, the various surfaces of the buildings in our lives are all producing energy.
This is a tough one for me to wrap my brain around, but I'm trying. We have 10kw worth of panels on our roof, good for 60 kwh days in the summer, and sometimes 1-2 kwh days in the winter, with 10 kwh days more reasonable / typical in the winter. That's a HUGE number of panels I'd need for winter time usage - like a 100 kw system instead of a 10 kw system, given that electricity consumption in the house neither increases or decreases. If the 100 kw system costs the same to acquire as the 10 kw system cost previously, then why not? Or maybe half as much as the 10 kw system? Or a 10th? Or ~free, as the cost of solar paint approaches the cost / quality / effectiveness of standard paint, why wouldn't you get the free electricity? At some point, the cost drops low enough that we're free of worrying about it.
In that sort of a world, we have the ability to support a new kind of an electric load that we can't afford to operate today. A load that can be turned off and on seasonally (not just hourly, daily, or maybe weekly), and that can consume prodigious quantities of energy in a fruitful fashion, while also being something we can't do by burning fuels.
The only idea I've had along these lines are desalination plants. In particular, plants that would be making freshwater from salt water in the summer, and then shut down during the winter and any hours/days/weeks where the weather is such that there isn't a gargantuan oversupply of power. These plants probably have some design changes from current plants, in that they would need the ability to spin up and shut down reasonably quickly, and with little or no effort or ill consequences on either side of the startup / shutdown.
To some degree, my understanding is that aluminum smelters (and probably other people that run big furnaces), have some flexibility along these lines, and help out the grid by taking power in large quantities during otherwise low demand periods to keep the baseload plants operating at a minimal level.
What else could we do, on a sporadic, on-demand, and flexible basis that requires stupendous amounts of power, that we can't do today because power isn't ~free?
Renewables bring a new dynamic into the market. That dynamic being that if it's a particularly sunny day and I get 70 kwh from my solar panels instead of 65, the incremental 5 kwh are "free" (I didn't buy any extra fuel to burn, to create those extra 5). Whether there's a use for them somewhere or not.
At low % of grid, the paradigm shift isn't apparent, or even important.
Renewables also generate supply that is very much not synchronized with the demands of the moment. My point is that trying to balance them is part of a fuel paradigm - and maybe that's a paradigm we can start weaning ourselves from.
As a thought experiment, imagine 10-20 years from now that solar continues it's rapid decrease in cost to install. Cheaper and cheaper to install, and effectively free once installed, electricity. In this situation, I can imagine reaching a point where it makes sense to install enough panels for winter time consumption here in Oregon, knowing that I'll be over generating by 4-10x in the summer (or maybe more). But the power is so cheap, it's still cost effective for winter.
Elon and many others have talked about solar paint and solar roofs, where instead of panels, the paint, the roofing shingles, the various surfaces of the buildings in our lives are all producing energy.
This is a tough one for me to wrap my brain around, but I'm trying. We have 10kw worth of panels on our roof, good for 60 kwh days in the summer, and sometimes 1-2 kwh days in the winter, with 10 kwh days more reasonable / typical in the winter. That's a HUGE number of panels I'd need for winter time usage - like a 100 kw system instead of a 10 kw system, given that electricity consumption in the house neither increases or decreases. If the 100 kw system costs the same to acquire as the 10 kw system cost previously, then why not? Or maybe half as much as the 10 kw system? Or a 10th? Or ~free, as the cost of solar paint approaches the cost / quality / effectiveness of standard paint, why wouldn't you get the free electricity? At some point, the cost drops low enough that we're free of worrying about it.
In that sort of a world, we have the ability to support a new kind of an electric load that we can't afford to operate today. A load that can be turned off and on seasonally (not just hourly, daily, or maybe weekly), and that can consume prodigious quantities of energy in a fruitful fashion, while also being something we can't do by burning fuels.
The only idea I've had along these lines are desalination plants. In particular, plants that would be making freshwater from salt water in the summer, and then shut down during the winter and any hours/days/weeks where the weather is such that there isn't a gargantuan oversupply of power. These plants probably have some design changes from current plants, in that they would need the ability to spin up and shut down reasonably quickly, and with little or no effort or ill consequences on either side of the startup / shutdown.
To some degree, my understanding is that aluminum smelters (and probably other people that run big furnaces), have some flexibility along these lines, and help out the grid by taking power in large quantities during otherwise low demand periods to keep the baseload plants operating at a minimal level.
What else could we do, on a sporadic, on-demand, and flexible basis that requires stupendous amounts of power, that we can't do today because power isn't ~free?
I agree. I'll make a couple of points, though.
Roofspace. I'm going to be limited in my production by roofspace. That's why I won't have a 100 kw system. It becomes important to be able to move power to my house from either batteries, or somewhere with more free space. This applies on a larger scale to big cities; New York City *has* to import power from the countryside, there's no way around it. This means that I think distribution and transmission is going to retain its importance, although the grid is going to look very different than it did in the days of centralized power plants.
The classic one is water heating. Unless you're doing it "on demand", it's not that important when the heater runs...
Coup in Turkey
Oil rises after apparent military uprising in Turkey
If you read the article, check out it's actual http title. Must have been a last minute switch...
We'll see where it goes once the dust settles. Geopolitical risks of oil. Not an issue with solar....
Oil rises after apparent military uprising in Turkey
If you read the article, check out it's actual http title. Must have been a last minute switch...
We'll see where it goes once the dust settles. Geopolitical risks of oil. Not an issue with solar....
Yeah, really long-term and solar is so cheap that you don't worry about unconsumed excess. Before we get to that point, there are tradeoffs to be made between more storage vs underutilized solar. So if incremental solar is cheap compared to incremental storage, then add more solar. Otherwise, you add more storage. Unfortunately, it will be really hard to store energy from fall to cover winter. Bioenergy can do this. Other forms of renewable energy might help as well. It will be fun to watch this play out in my retirement.
TheTalkingMule
Distributed Energy Enthusiast
Don't want to take this off-topic, but I can't resist when we start talking about the inevitable energy surplus right around the corner. Elon seems to hate fuel cell inefficiency, but when mid-day supply hits 250% of demand it makes sense. So long as you can store lots of it....
Moving from coal/nat gas to renewables is such a crazy transition that even people in the know can't picture what 100% wind/solar/storage will look like in 2040. IMO there's an inherent advantage to generating a fuel from sustainable clean sources.
adiggs
Well-Known Member
That's what we do with all the excess energy - desalinate salt water, and then crack it to make hydrogen to store for the winter, to run through a fuel cell and turn back into energy.
Storing hydrogen for a long time is actually quite difficult and expensive to do safely.
Well, I guess when we get to a point where solar and other renewables are generating surplus daily energy for most of the year, we'll figure out some creative uses for it. Even low efficiency longterm storage is more attractive than simply curtailing solar and wind. Desalinated water can be stored and shipped, so that could be a good seasonal harvest of surplus energy in some areas. Eventually there may be carbon sequestration technologies that may make beneficial use of seasonal power. So we could probably imagine other industrial power uses that might be fine with slowing production in December and January.
Frankly, I think getting to 80% renewables is the most critical part. That's enough to transform the whole economy and industrial practices. The complexities of squeezing off that last 20% of non-renewables often gets used to derail the more critical steps needed to get to 80% renewables. Incumbents always like to use the perfect to destroy the good, the impossible 100% solutions to derail the excellent 80% solutions.
Along that path to 80% renewables, there is good milestones like this:
California ISO generated 8 GW of solar, topping last year's record by 2 GW
What not mentioned here is that while solar with reaching a new peak, all renewables combined where supplying over 49% of all the power in California, not counting any portion of imports as renewable. Moreover, for the whole day, renewables supplied 39.5% of the energy.
Frankly, I think getting to 80% renewables is the most critical part. That's enough to transform the whole economy and industrial practices. The complexities of squeezing off that last 20% of non-renewables often gets used to derail the more critical steps needed to get to 80% renewables. Incumbents always like to use the perfect to destroy the good, the impossible 100% solutions to derail the excellent 80% solutions.
Along that path to 80% renewables, there is good milestones like this:
California ISO generated 8 GW of solar, topping last year's record by 2 GW
What not mentioned here is that while solar with reaching a new peak, all renewables combined where supplying over 49% of all the power in California, not counting any portion of imports as renewable. Moreover, for the whole day, renewables supplied 39.5% of the energy.
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