Shorting Oil, Hedging Tesla

[replicant]

Those taxes on flights like departure taxes are a way to get around the fact that international law prohibits tax on aviation fuel

That's insane, we've got to change these stupid laws (and quick).
Aviation fuel - Wikipedia

We're flirting with right-wing extremists in many Western countries, and here in France, many middle-class citizens are now refusing necessary environmental actions until the rich are taxed for their fair (opulent?) share.

And as far I as know, the current prohibition only applies to international flights.

 

[ItsNotAboutTheMoney]

That's insane, we've got to change these stupid laws (and quick).
Aviation fuel - Wikipedia

We're flirting with right-wing extremists in many Western countries, and here in France, many middle-class citizens are now refusing necessary environmental actions until the rich are taxed for their fair (opulent?) share.

And as far I as know, the current prohibition only applies to international flights.

There is taxation, but you can't tax fuel that's already on the plane, so there's a competitive taxation problem.

 

[mspohr]

There is taxation, but you can't tax fuel that's already on the plane, so there's a competitive taxation problem.

That's the problem with international taxes. It's a race to the bottom. What is needed is international agreement on uniform taxes. If a country doesn't go along, then you tax the fuel on the plane and the fuel used to get to the destination.
I think Emirates is competitive because of cheap fuel.

 

[replicant]

There is taxation, but you can't tax fuel that's already on the plane, so there's a competitive taxation problem.

That's a good explanation for the prohibition of aviation fuel taxation. Too bad there's no justification for it.Do you mind if I hang this illustration?

 

[TheTalkingMule]

We are now pumping 11.9Mb/d in the US, a cool 1M more than in 2018.
The most recent 4 week average is 2(TWO!)Mb/d higher than the same period last year.
Venezuela has now doubled production thanks to China's increased ownership and influence.
OPEC has been able to initiate almost zero real cuts.
US stockpiles are at 437M having never been above 400M prior to 2015.
Gas/distillate stockpiles are nearing 1yr highs.
Chinese and global growth are almost certain to slow.
The entire US gov't is shut down.

Explain to me how WTI isn't at $35.

 

[neroden]

Explain to me how WTI isn't at $35.

Irrational exuberance.

If I were daring enough to trade commodities futures, I'd probably make a big bearish bet on oil right about now. I'm not that daring; there are traps in commodities futures trading I don't know yet.

 

[neroden]

This author believes that the demand by producers to lock in oil prices (sell futures) is far higher than the demand for buyers to lock in oil prices (buy futures).

What’s Behind Oil’s Slow Flash Crash? | OilPrice.com

Since this is unlikely to change, and may even accelerate, we should expect the futures market to drop, fast. I wonder when the spot market will follow?

 

[renim]

We are now pumping 11.9Mb/d in the US, a cool 1M more than in 2018.
The most recent 4 week average is 2(TWO!)Mb/d higher than the same period last year.
Venezuela has now doubled production thanks to China's increased ownership and influence.
OPEC has been able to initiate almost zero real cuts.
US stockpiles are at 437M having never been above 400M prior to 2015.
Gas/distillate stockpiles are nearing 1yr highs.
Chinese and global growth are almost certain to slow.
The entire US gov't is shut down.

Explain to me how WTI isn't at $35.

perhaps the US gov't shutting down is a considered as a +ve

more seriously, perhaps its takes ALL the above to balance against Chinese continued growth in vehicle fleet.
China’s car population grows up to 240 million units by the end of 2018
'There were a total of 31.72 million motor vehicles newly registered in China last year, making the country's motor vehicle population up to around 327 million units by the end of 2018, according to the data announced by China's Traffic Management Bureau of the Public Security Ministry.China's car population by 2018 rose to 240 million units, which was 22.85 million units more than that of the previous year.'

i suppose car are a subset of vehicle

 

[dc_h]

Glass bottles do not have to be single use

I’ve always been very negative about ethanol, but I’ve been driving my son to school outside of Indianapolis and ethanol is lifeblood for a lot of rural America. The economy in a lot of rural America is terrible and EV’s will decimate ethanol. It made me wonder if we had some policy to encourage biodegradable plant based plastics could create more jobs then ethanol and help the environment. Just a thought, but the heartland people need industry and the world needs to clean up to support 10 billion middle class humans.

 

[ItsNotAboutTheMoney]

I’ve always been very negative about ethanol, but I’ve been driving my son to school outside of Indianapolis and ethanol is lifeblood for a lot of rural America. The economy in a lot of rural America is terrible and EV’s will decimate ethanol. It made me wonder if we had some policy to encourage biodegradable plant based plastics could create more jobs then ethanol and help the environment. Just a thought, but the heartland people need industry and the world needs to clean up to support 10 billion middle class humans.

Almost all gasoline is 10% ethanol.
A gallon of ethanol has about 22kWh of energy.
Ethanol burns very cleanly as long as the combustion is well designed.
There is a lot of ethanol production.
In very cold weather EV range is significantly affected due the need for heat.

=>

Ethanol heaters for EVs.

As BEVs replace gasoline vehicles, more ethanol is available. So no new production needed.
Flammability is a safety issue, but could use something like propane bottle swaps. Since you'd only need to use the heater in cold weather when outside of or pushing range, some extra overhead wouldn't be a big issue.

Since overall there wouldn't be as large a need for ethanol, it could probably be supported by more sustainable ethanol production.

 

[Tim]

I’ve always been very negative about ethanol, but I’ve been driving my son to school outside of Indianapolis and ethanol is lifeblood for a lot of rural America. The economy in a lot of rural America is terrible and EV’s will decimate ethanol. It made me wonder if we had some policy to encourage biodegradable plant based plastics could create more jobs then ethanol and help the environment. Just a thought, but the heartland people need industry and the world needs to clean up to support 10 billion middle class humans.

Continuing subsidies for inefficient and environmentally destructive activities isn't productive imo.

Only 1% of the u.s. is involved in agriculture and only 10% are rural. Rural lifestyles exist in the u.s. today only because of huge welfare payments by the other 90%. This is nothing new.

I think the solution is probably the same as it is for coal mining. Which is to say, tax and regulate that lifestyle to be prohibitive and redirect all the current subsidies to help and encourage these people to pursue lifestyles that are more civically beneficial, sustainable and productive.

Which I suppose is what you're suggesting. However, I guess I'd propose instead to rip up the drain tiles and pay everyone to move to cities.

 

[mspohr]

I’ve always been very negative about ethanol, but I’ve been driving my son to school outside of Indianapolis and ethanol is lifeblood for a lot of rural America. The economy in a lot of rural America is terrible and EV’s will decimate ethanol. It made me wonder if we had some policy to encourage biodegradable plant based plastics could create more jobs then ethanol and help the environment. Just a thought, but the heartland people need industry and the world needs to clean up to support 10 billion middle class humans.

Ethanol uses more fossil fuels and environmental damage. Government subsidized environmental damage is not a solution.

 

[dc_h]

Continuing subsidies for inefficient and environmentally destructive activities isn't productive imo.

Only 1% of the u.s. is involved in agriculture and only 10% are rural. Rural lifestyles exist in the u.s. today only because of huge welfare payments by the other 90%. This is nothing new.

I think the solution is probably the same as it is for coal mining. Which is to say, tax and regulate that lifestyle to be prohibitive and redirect all the current subsidies to help and encourage these people to pursue lifestyles that are more civically beneficial, sustainable and productive.

Which I suppose is what you're suggesting. However, I guess I'd propose instead to rip up the drain tiles and pay everyone to move to cities.

The challenge is that rural America will continue to hollow out, but it's not going away. You are presenting the same argument used against solar, wind and EV subsidies. I'm a moderate libertarian, but consistently see areas of opportunity where markets won't work in the short term. Policy to fill market gaps are why we have governments in the first place.

Self driving humans on the farm again and further reduce rural jobs. Wind and solar is a source of jobs, but again, much less than old fashioned farm jobs. Farm industry still includes machine repair and other complex industrial and service jobs, but tech changes are going to continue to push out jobs. Trying to get 30 states to vote themselves out of existence is futile. Maybe encouraging people to leave and move to more urban location is the right solution, but i think its overly simple. At some point, will the last person in each state be their own senator and house rep? Do rural Americans want to live in bigger cities? Where would they move and what would they do for a living? Who pays for the move and job retraining? Look at successful countries with busy rural areas and you see industrial and ag policies that encourage lower scale industry and have good transportation to rural regions.

I think oil based plastics and their very long life span is a huge problem. We can tax that plastic to make glass a viable alternative, or we can make an alternative to oil based plastics. Perhaps a simple 1 cent tax on every plastic vessel that is not biodegradable would be all that is needed. Maintaining a diversified broad based economy is an insurance policy and helps reduce cyclic volatility.

Sorry for the rambling response. I don't think the site has a lot of rural people, so I'm not sure I'd get much buy-in, but I think plant based plastics is a great opportunity to clean up the environment and help out a demographic that has been manipulated by politics and left behind by both liberal and conservatives. I think any policy oriented administration, either liberal or conservative would have a positive policy opportunity.

 

[mspohr]

The challenge is that rural America will continue to hollow out, but it's not going away. You are presenting the same argument used against solar, wind and EV subsidies. I'm a moderate libertarian, but consistently see areas of opportunity where markets won't work in the short term. Policy to fill market gaps are why we have governments in the first place.

Self driving humans on the farm again and further reduce rural jobs. Wind and solar is a source of jobs, but again, much less than old fashioned farm jobs. Farm industry still includes machine repair and other complex industrial and service jobs, but tech changes are going to continue to push out jobs. Trying to get 30 states to vote themselves out of existence is futile. Maybe encouraging people to leave and move to more urban location is the right solution, but i think its overly simple. At some point, will the last person in each state be their own senator and house rep? Do rural Americans want to live in bigger cities? Where would they move and what would they do for a living? Who pays for the move and job retraining? Look at successful countries with busy rural areas and you see industrial and ag policies that encourage lower scale industry and have good transportation to rural regions.

I think oil based plastics and their very long life span is a huge problem. We can tax that plastic to make glass a viable alternative, or we can make an alternative to oil based plastics. Perhaps a simple 1 cent tax on every plastic vessel that is not biodegradable would be all that is needed. Maintaining a diversified broad based economy is an insurance policy and helps reduce cyclic volatility.

Sorry for the rambling response. I don't think the site has a lot of rural people, so I'm not sure I'd get much buy-in, but I think plant based plastics is a great opportunity to clean up the environment and help out a demographic that has been manipulated by politics and left behind by both liberal and conservatives. I think any policy oriented administration, either liberal or conservative would have a positive policy opportunity.

The agricultural sector hollowed itself out 50 years ago. It's not coming back. Agriculture profits (heavily government subsidized) flow to large corporations, not rural communities.
What to do about this? A universal basic income could give people the stability they need to develop education and skills to survive.

 

[mspohr]

New Carbon Capture Research Emphasizes Recycling, Not Sequestration | CleanTechnica

Another scheme to keep burning fossil fuels.
Probably will turn out to be too expensive.

 

[jhm]

Tesla (TSLA)'s Big Drop is an Opportunity

Notable energy trader Martin Tiller is now plugging Tesla as a buy. Notice the conservative framing here.

As I said, the growth profile of Tesla makes a negative reaction to job cuts almost inevitable, but in context it isn’t that big of a deal and can even be looked at as a positive development.

The cut works out to be about seven percent of the workforce at the company, which sounds bad until you consider it in the context of thirty percent job growth last year. With that in mind, the cuts look more like an adjustment to last year's overly optimistic view than anything else. That, and the fact that TSLA’s value is all about the future, suggest the stock’s plunge on Friday looks massively overdone.

Some may maintain that this is the problem with TSLA, that everything is based on what might be, not what is. If that is truly the case, then Friday’s announced cuts could be seen as good news, not bad. It is a sign of a new spirit of realism at the company and a focus on cost control that many people would say was long overdue. Big institutional investors, who currently hold over sixty percent of the stock, have been calling for cost reductions for some time and if this is seen as a move in that direction, it will ultimately be supportive of TSLA stock.

Conservative investors generally like staff reductions as signal that the company is committed to controlling cost. But also notice the broad acceptance that EVs are the future.

The thing is, investing in Tesla is about taking a bet on the future, not just of that company, but also of the auto industry more broadly. We are moving inexorably towards a day when the majority of vehicles are no longer powered by gasoline and it is now clear that electric vehicles (EVs) are going to dominate that move. Tesla is not the only company in that business, as every car manufacturer is now committed to EVs to some extent, but they have a significant head start that should serve them well for quite a while.

So I think this is quite striking that energy investors could start warming up to Tesla as an investment. The framing may be different than how a typical Tesla bull might frame it. But as energy investors come to understand that much of the auto industry will transition to EVs, I think they will at least want a little exposure to that even as they continue to invest in oil. Tesla can easily be the best play for investors in the west that want some pure EV exposure. As tesla continue to signal conservative values around cost control and earnings, this "realism" can flip the narrative and draw in energy investors. I, for one, welcome such investors.

 

[abasile]

I guess I'd propose instead to rip up the drain tiles and pay everyone to move to cities.

Some fraction of the population is always going to value living "in the sticks", surrounded by natural beauty and/or open land. It's better to give people choices. There will continue to be a need for farm workers as well as employees at rural resorts, and they need places to live. Even city dwellers need to have some number of small, rural towns so that they have places to visit on vacation.

Rather than seeing rural lifestyles as a liability due to the high cost of transportation, we need to convert that transportation to more sustainable, cost effective solutions such as EVs, hyperloop, etc. Perhaps there may also be a place for consolidation of dwindling, rural populations; some residents might be willing to agree to abandon some small towns and consolidate into other, nearby towns, thus reducing the overall infrastructure maintenance burden and thereby lowering costs.

Also, I look forward to the day when large efficiency gains in food production enable chunks of farmland to be turned back to nature while feeding the whole world. Much of the eastern and northwestern US used to be covered by forests which were felled to make room for farmland. Imagine the quality of life, ecological, and climate benefits of replacing some of that farmland with large forest reserves. Some will enjoy living in small towns adjacent to such reserves, and city dwellers will appreciate having more opportunities to "get away" without traveling all that far.

 

[jhm]

IEA Chief: EVs Are Not The End Of The Oil Era | OilPrice.com

Well, I had to correct the IEA chief about EVs. You can read my comments. Each year the argument for EV disruption gets easier to make. But Fatih Birol keeps asserting nonsense.

 

[jhm]

EIA forecasts renewables will be fastest growing source of electricity generation - Today in Energy - U.S. Energy Information Administration (EIA)

Here's the money shot:

Look at the downward movement in $/MWh. In recent years NG has generally remained below $25/MWh while coal has slid from about $25/MWh to $20/MWh. Wind, solar and battery PPA falling below $25/MWh all-in, the cost of fuel will have to keep dropping. The price pressure will both push gas and coal prices down and push down consumption of these fuels.

For several years, I've been talking about how renewables are creating a price cap on gas for generation. It is nice to see a chart that confirms this notion. In ten years time, gas has gone from orbiting $5/MMBtu to about $2.5/MMBtu. How much longer can gas keep losing more than 6% in value each year?

 

[reddit_tl]

Just a thought:
I am shorting GM and Ford as a hedge. Worked nicely so far.