Shorting Oil, Hedging Tesla

[jhm]

6 Factors Will Hasten Or Defer Peak Oil Demand | CleanTechnica

Interesting discussion of peak oil

The author points to "induced demand" (that greater consumption can be induced by lower prices), but fails to recognize that the prices at which demand can be induced may be well below that price at which production can attract investment. So he seems not to understand that both supply and demand factors are involved with peak oil. Personally, I have given up on the distinction between peak oil supply and peak oil demand. It's just not helpful. Yes, technology has enabled more shale oil to be produced that what Hubbert may have been able to foresee, but it is not at all clear that technology advances can lead to sustainable lower prices. Shale has not even demonstrated that it can be reliably profitable. So I find this author's analysis less than satisfying. It's hardly complete. Low interest rates can delay the peak, and the dearth of exploration can hasten it (not that exploration is at all profitable at this point). The big question is how long can oil keep drawing in enough investment to keep production growing?

 

[jhm]

FWIW, I think US shale producers can weather sub $60 oil better than most petro-states who depend on high oil prices to function, and to pay free social benefits to keep their populace from rioting (like SA).

That's interesting. In the US, oil companies just need to keep investors throwing money down the hole. but in petro-states oil interests need to pay a certain political price to stay in power. Investors may well be cheaper to placate than political subjects.

I used to see the Aramco IPO as a way for Saudi royalty to exit the political obligations and run away with shares, but I looks like they can't get out that easily.

 

[jhm]

The technology, and new thinking, needed for 100 per cent renewable grid

Takes the view that industries are already much more flexible in their demand for electricity and so not as much storage will be needed. You still need battery capacity to handle intraday variation in production and consumption. I suspect this is around 2 to 4 hours of storage. Beyond that many industries can just slow consumption when prices are high. We've discussed electrolyzers and carbonizers playing this sort of role, but really lots of industrial operations can learn how to exploit cheap power when the sun is shining or the wind is blowing. This would represent a market based solution.

 

[dc_h]

This really is important progress. My favorite application of CCS is with bioenergy (BECCS). Bioenergy is carbon neutral, but when you capture some 90% of emissions, you have negative net emissions, plus some fuel based dispatchable energy to help balance out the grid. I suspect the only way that we stay within a 2 degree climate change scenario is to deploy negative emissions technologies such as BECCS. So we need CCS tech to advance rapidly down the cost curve.

Wouldn’t this be a great technology for the government to promote with some tax advantages at shuttered coal plants. The skill sets to run a site would be similar and change perceptions.

 

[TheTalkingMule]

And Brent slips back below $60 in spite of moderate cut announcements from OPEC+R. I don't think there's nearly enough interest in cutting further, if they were actually gonna cut at all. My uneducated assumption is there's now a long way yet to fall for Brent.

 

[jhm]

And Brent slips back below $60 in spite of moderate cut announcements from OPEC+R. I don't think there's nearly enough interest in cutting further, if they were actually gonna cut at all. My uneducated assumption is there's now a long way yet to fall for Brent.

Prisoner's dilemma?

 

[TheTalkingMule]

These countries have to be modeling the revenue impact of cuts relative to just doing as they pleased from day 1. One has to imagine that number now grows quite large.

This whole thing is going to permanently crumble and it could be as soon as right now. If we ease into a recession early next year, Brent is capped at $50 through 2020 and there's no way SA comes out the other side of that influencing global production in any meaningful way.

In the grand scheme of things....should we be rooting for a recession right now? Even from an EV adoption perspective it might be best. The faster we ruin the traditional oil market, the faster the end of days chaos and permanent end(change) comes to all these petro-states. Then production quickly plummets and prices skyrocket one last time. That should about do it. So recession is good, no?

Lets do it. Everyone stop buying stuff.

 

[replicant]

These countries have to be modeling the revenue impact of cuts relative to just doing as they pleased from day 1. One has to imagine that number now grows quite large.

This whole thing is going to permanently crumble and it could be as soon as right now. If we ease into a recession early next year, Brent is capped at $50 through 2020 and there's no way SA comes out the other side of that influencing global production in any meaningful way.

In the grand scheme of things....should we be rooting for a recession right now? Even from an EV adoption perspective it might be best. The faster we ruin the traditional oil market, the faster the end of days chaos and permanent end(change) comes to all these petro-states. Then production quickly plummets and prices skyrocket one last time. That should about do it. So recession is good, no?

Lets do it. Everyone stop buying stuff.

Sobriety is always a good thing, right?

 

[ZachF]

That's interesting. In the US, oil companies just need to keep investors throwing money down the hole. but in petro-states oil interests need to pay a certain political price to stay in power. Investors may well be cheaper to placate than political subjects.

I used to see the Aramco IPO as a way for Saudi royalty to exit the political obligations and run away with shares, but I looks like they can't get out that easily.

When it goes down the oil companies go bankrupt, their debt goes away, and their assets get bought for pennies on the dollar by the survivors, they when it goes back up those survivors pile on the debt, then when it goes back down.... rinse, repeat, until death

 

[jhm]

When it goes down the oil companies go bankrupt, their debt goes away, and their assets get bought for pennies on the dollar by the survivors, they when it goes back up those survivors pile on the debt, then when it goes back down.... rinse, repeat, until death

Yep, zombie economics.

 

[jhm]

Nuclear Power Becomes Critical To Arctic Dominance | OilPrice.com

Looks like the Arctic could be the place where SMRs evolve. I just hope there are no mishaps.

 

[jhm]

Citi: Oil Prices Are Going Nowhere Next Year | OilPrice.com
Citi sees Brent staying in the narrow band of $55 to $65. They think US producers need WTI over $40 to grow production.

 

[neroden]

When it goes down the oil companies go bankrupt, their debt goes away, and their assets get bought for pennies on the dollar by the survivors, they when it goes back up those survivors pile on the debt, then when it goes back down.... rinse, repeat, until death

Who the ******** is lending to them?!?!

 

[neroden]

Nuclear Power Becomes Critical To Arctic Dominance | OilPrice.com

Looks like the Arctic could be the place where SMRs evolve. I just hope there are no mishaps.

Nuclear fantasy material. They're far too expensive to be worth it. I mean, the Russian government might waste their money on it, and so might the US government, but it's not really going anywhere.

I do have to wonder how long Russia can afford to waste money on dumb *sugar* for its military. It's part of what knocked out the Soviet Union. The US is far richer and it's not clear how long the US can afford to waste money on this.

 

[jhm]

Nuclear fantasy material. They're far too expensive to be worth it. I mean, the Russian government might waste their money on it, and so might the US government, but it's not really going anywhere.

I do have to wonder how long Russia can afford to waste money on dumb *sugar* for its military. It's part of what knocked out the Soviet Union. The US is far richer and it's not clear how long the US can afford to waste money on this.

We'll if there is a learning curve for SMRs to follow, it has to start somewhere someone is willing to spend too much for it. However, the history of nuclear power is that it follows a negative learning curve. It gets more expensive as we learn just how dangerous it is.

 

[TheTalkingMule]

Give me a rational reason API report figures are reported each week. Given the benefit of the doubt.....they were off by 10M and 9M barrels the last two weeks compared to EIA reports a day later.

 

[jhm]

EVs, Oil, And ICE: Impact By 2023 And Beyond EVs, Oil, And ICE: Impact By 2023 And Beyond | Seeking Alpha

Some interesting stuff going on in this one. I especially like the author's chart where ICE sales fall off before EV sales can replace them. So there is a dip in total auto sales.

We've discussed this sort of massive Osborne effect before, but I don't think I've ever tried to actually model it. It seems to me that a three-compatment model could do the trick. The first compartment is "ICE", and the third compartment is "EV". Consumers in these compartments actually buy new vehicles and count as annual sales. But there is a transitional compartment, "PreEV". Consumers in this compartment have decided not to purchase ICE, but are deferring their purchace of an EV to a later year. So a PreEV is a lost sale to ICE, but does not register as a sale to EV. The dip in total (ICE+EV) is quantified by PreEV. PreEV reaches a peak near the time that EV sales overtake ICE sales. PreEV actually is pent up demand for EVs, so it is only reduced once EV production is high enough to satisfy the number of ICE buyers that are transitioning to PreEV in a given year.

So the PreEV phenomenon is really quite leathal for traditional ICE makers. They are counting on ICE sales to fund the transition to EV production, and yet PreEV deprives them of that revenue when they need it most.

There's another disruption happening too. Some people are transitioning from being ICE owners to Fleet riders, especially as autonomous EVs come on the scene. So like PreEV, these consumers will not be buying ICE, but they will also not be buying their own EV. Rather some 3 to 5 Fleet consumers will motivate fleet operators to buy 1 EV to be shared. We don't quite have the AEV product to satisfy this, but we do have the likes of Uber and Lyft leveraging a fleet of largely used ICE to satisfy this market in anticipation of new AEV.

In both cases, PreEV and Fleet are leveraging used ICE. This hurts ICE makers, but it does help avoid stranding of the existing ICE fleet. The real question for the environment is how quickly we can run off the ICE fleet. Replacing every ICE vehicle with an EV is not something that needs to happen. A smaller fleet of total vehicles would be just fine from an environmental point of view.

 

[ggies07]

EVs, Oil, And ICE: Impact By 2023 And Beyond EVs, Oil, And ICE: Impact By 2023 And Beyond | Seeking Alpha

Some interesting stuff going on in this one. I especially like the author's chart where ICE sales fall off before EV sales can replace them. So there is a dip in total auto sales.

We've discussed this sort of massive Osborne effect before, but I don't think I've ever tried to actually model it. It seems to me that a three-compatment model could do the trick. The first compartment is "ICE", and the third compartment is "EV". Consumers in these compartments actually buy new vehicles and count as annual sales. But there is a transitional compartment, "PreEV". Consumers in this compartment have decided not to purchase ICE, but are deferring their purchace of an EV to a later year. So a PreEV is a lost sale to ICE, but does not register as a sale to EV. The dip in total (ICE+EV) is quantified by PreEV. PreEV reaches a peak near the time that EV sales overtake ICE sales. PreEV actually is pent up demand for EVs, so it is only reduced once EV production is high enough to satisfy the number of ICE buyers that are transitioning to PreEV in a given year.

So the PreEV phenomenon is really quite leathal for traditional ICE makers. They are counting on ICE sales to fund the transition to EV production, and yet PreEV deprives them of that revenue when they need it most.

There's another disruption happening too. Some people are transitioning from being ICE owners to Fleet riders, especially as autonomous EVs come on the scene. So like PreEV, these consumers will not be buying ICE, but they will also not be buying their own EV. Rather some 3 to 5 Fleet consumers will motivate fleet operators to buy 1 EV to be shared. We don't quite have the AEV product to satisfy this, but we do have the likes of Uber and Lyft leveraging a fleet of largely used ICE to satisfy this market in anticipation of new AEV.

In both cases, PreEV and Fleet are leveraging used ICE. This hurts ICE makers, but it does help avoid stranding of the existing ICE fleet. The real question for the environment is how quickly we can run off the ICE fleet. Replacing every ICE vehicle with an EV is not something that needs to happen. A smaller fleet of total vehicles would be just fine from an environmental point of view.

I guess I would be a data point for the "PreEV" stats as I waited two and half years to buy an EV instead of a new ICE and my old car was 11 years old.....

 

[ZachF]

I guess I would be a data point for the "PreEV" stats as I waited two and half years to buy an EV instead of a new ICE and my old car was 11 years old.....

I think the steep part of the dropoff in ICE sales will occur when the faster depreciation rate of ICE vehicles really starts to take hold. People will be dissuaded from buying because of that, and trade-ins will be worth far less. This will be far more of a large effect than people waiting for an EV.

 

[skitown]

I think the steep part of the dropoff in ICE sales will occur when the faster depreciation rate of ICE vehicles really starts to take hold. People will be dissuaded from buying because of that, and trade-ins will be worth far less. This will be far more of a large effect than people waiting for an EV.

This, coupled with lower than expected lease return values is going to be a sight to behold IMO. My guess is that ICE will get pushed harder and harder via cheap lease deals to move them off the dealership lots and the lenders are going to get left holding the bag when the music stops. And the whole sub prime auto lending industry is already looking...interesting.