Shorting Oil, Hedging Tesla

[mblakele]

Apparently Exxon still sees growth ahead:

ExxonMobil gambles on growth

ExxonMobil’s biggest risk appears to be a world where oil demand peaks as measures to combat emissions grow, and then prices fall. Projects might become uneconomic sooner than expected, stranding the company’s assets. Mr Woods says he is backing projects with low costs. He argues that his firm’s unusually high level of integration of its various businesses and technology means it can produce more efficiently than its peers. Take oil extracted in the Permian basin of Texas. ExxonMobil uses data analysis to drill for oil using extra-long wells, then transports it to company refineries and petrochemical plants nearby.​

 

[mspohr]

Renewable Energy Rewrites Rules of Global Geopolitics As Influence Of Fossil Fuel Producers Falls

A new report from the International Renewable Energy Agency (IRENA) highlights the way the energy landscape is changing, and the dangers and opportunities that it brings to different countries around the world. A New World: The Geopolitics of the Energy Transformation says that the consequences of the shift from fossil fuels to renewable energy could be as momentous as the switch from biomass to coal and oil two centuries ago.

Oil and gas producers that don't prepare will find themselves face a significant loss of revenue and even political instability if they don't act to replace those revenues soon. While some have started on the transition, such as the UAE and Saudi, others such as Venezuela, Angola, Yemen, Iraq and Libya, are likely to struggle to adjust.

Elsewhere, though, the rise of renewables should smooth international geopolitical tensions, because every country in the world has at least some renewable energy potential, so the reliance on a few countries for energy resources is starting to disappear. The energy transformation will change energy statecraft as we know it, said outgoing IRENA President Adnan Amin.

“Unlike fossil fuels, renewable energy sources are available in one form or another in most geographic locations,” he pointed out. “This abundance will strengthen energy security and promote greater energy independence for most states. At the same time, as countries develop renewables and increasingly integrate their electricity grids with neighbouring countries, new interdependencies and trade patterns will emerge. The analysis finds oil and gas-related conflict may decline, as will the strategic importance of some maritime chokepoints.”

 

[TheTalkingMule]

In other words.....we're about to improve dramatically as a human society, but certainly not because we're getting any better as individual humans. I guess we should just celebrate the upside.

 

[mspohr]

In other words.....we're about to improve dramatically as a human society, but certainly not because we're getting any better as individual humans. I guess we should just celebrate the upside.

I'm not sure this has anything to do with "human nature". This has been studied a lot.
Are Humans Good or Evil?
Are Humans Naturally Good or Bad?
"Human nature is not one thing, neither 'good' nor 'bad' overall. People in general have been genetically endowed by evolution with a wide variety of tendencies and capacities that respond to -- but are not necessarily controlled or determined by -- their environment. And so we see all sorts of individual and cultural behaviors, providing evidence to defend virtually any assertions about 'human nature.'"
Experimental Theology: Are Humans Good or Bad?: Hobbes vs. Rousseau or Should You Breast-feed Your Baby?
Hobbes:
Human Nature = Bad
Civilization = Good
Rousseau:
Human Nature = Good
Civilization = Bad

Aside from a few psychopathic personalities such as Trump, I tend to believe Rousseau.

 

[Mader Levap]

At least there won't be any more oil wars, yes. Eventually.

 

[mspohr]

As Venezuela goes, so goes oil.
Lessons About The Contemporary State Of Fossil Fuels -- Venezuela-Style | CleanTechnica

A February, 2019 article in Resilience titled, “Venezuela’s collapse is a window into how the oil age will unravel,” offers a fascinating outline of how Venezuela has become a country with the largest reserves of crude oil in the world but which is incapable of developing them. The article acknowledges that various elements of socialism, corruption, and neoliberal capitalism are part of the very large problem. “We’ve shifted into a new era. The world has moved from largely extracting cheap, easy crude, to becoming increasingly dependent on unconventional forms of oil and gas that are much more difficult and expensive to produce.”

 

[neroden]

Apparently Exxon still sees growth ahead:

ExxonMobil gambles on growth

ExxonMobil’s biggest risk appears to be a world where oil demand peaks as measures to combat emissions grow, and then prices fall. Projects might become uneconomic sooner than expected, stranding the company’s assets. Mr Woods says he is backing projects with low costs. He argues that his firm’s unusually high level of integration of its various businesses and technology means it can produce more efficiently than its peers. Take oil extracted in the Permian basin of Texas. ExxonMobil uses data analysis to drill for oil using extra-long wells, then transports it to company refineries and petrochemical plants nearby.​

Throwing stockholders' money down holes in the ground. ExxonMobil may be the last Integrated Oil Company to see the handwriting on the wall...

 

[neroden]

Experimental Theology: Are Humans Good or Bad?: Hobbes vs. Rousseau or Should You Breast-feed Your Baby?
Hobbes:
Human Nature = Bad
Civilization = Good
Rousseau:
Human Nature = Good
Civilization = Bad

My view is influenced by scientific studies of social birds. In bird societies, there are "law abiding" birds, "cheaters", and "enforcers" who catch and punish cheaters. Natural selection has a *balancing selection* effect. Cheaters survive longer and have more children... unless there are *too many of them*, in which case the whole bird community starves and dies. Excess enforcement, however, wastes energy which could be used surviving the winter.

Humans are no different. We have the same balancing selection pressure; we have cheater types, "ordinary law abiding" types, and "enforcer" types, in different proportions. (In case you're wondering, my personality tends towards the enforcer.)

Right now there are too many cheaters in positions of power and it looks like the whole human community will starve and die. If we peck the cheaters with our beaks and throw them out of the communal nest to starve on their own, maybe we can protect the community.

 

[TheTalkingMule]

Throwing stockholders' money down holes in the ground. ExxonMobil may be the last Integrated Oil Company to see the handwriting on the wall...

I think there's a fairly wide disconnect between talk and action with XOM. The talk is designed to keep oil relevant and force the perception of a fossil dependent 2040, but their recent action leans toward curtailing spending/exploration. Investors are likely fine with both.

 

[jhm]

Boom! Fossil Vehicle Sales Are Officially Now Decreasing In China, Europe, & USA — #CleanTechnica Report | CleanTechnica

This is pretty important. The top three auto markets, China, US and Europe, are all declining in ICE sales. I suspect this also signals the peak for global ICE sales.

We've anticipated this peak. It was definitely to come well in advance of peak gasoline or diesel consumption. Though it may not be a big deal for the oil industry, I do think it signals a crisis for the ICE industry. Traditional automakers will find it increasingly difficult to grow their ICE business. ICE growth for one company comes at cost of decline for another company as the whole ICE pie shrinks.

At some point this reality will sink into the consciousness of investor. Auto investors who want to see growth will have to look seriously at which automakers have competitive EV programs. Short of growing an organic EV business, growth by acquisition may still be possible. I do expect consolidation in the ICE industry. But for investors who value organic growth, EVs will be imperative.

I do believe this is an opportunity for Tesla shareholders. Tesla may well be the only automotive growth opportunity outside of China EV makers.

 

[jhm]

Indian Railways Pushes Towards Goal Of Full Electrification By 2022 With ABB Deal | CleanTechnica

I nearly overlooked this one. The ABB deal itself is pretty small. The big issue here is India's ambition to electrify all rail by 2022. That is a fast conversion for any entire transport mode.

I'd like to know more about what is driving this train electrification effort. My guess is that domestic renewable electricity is cheap compared to importing diesel (or importing crude plus capex for refinery build out). Plus, this switch cuts local pollution and total emissions. India is doing this conversion domestically as the politics their prefer that sort of solution.

Basically, I see this as supporting my expectation that diesel will peak globally in early 2020s, before gasoline peaks. The combination of cheap renewables and lower cost batteries strongly support conversion of rail. This is right in line with electric buses.

 

[ggr]

Indian Railways Pushes Towards Goal Of Full Electrification By 2022 With ABB Deal | CleanTechnica

I nearly overlooked this one. The ABB deal itself is pretty small. The big issue here is India's ambition to electrify all rail by 2022. That is a fast conversion for any entire transport mode.

I'd like to know more about what is driving this train electrification effort. My guess is that domestic renewable electricity is cheap compared to importing diesel (or importing crude plus capex for refinery build out). Plus, this switch cuts local pollution and total emissions. India is doing this conversion domestically as the politics their prefer that sort of solution.

Basically, I see this as supporting my expectation that diesel will peak globally in early 2020s, before gasoline peaks. The combination of cheap renewables and lower cost batteries strongly support conversion of rail. This is right in line with electric buses.

But... how do you ride on the roof of an electric train?

 

[jhm]

But... how do you ride on the roof of an electric train?

You don't. That would block light to the solar panels.

 

[jhm]

Column: Coal going from winner to loser in India's energy future | Reuters

Looks like new coal is dead in India. You can't beat renewables at 4c/kWh in India. Next they'll need batteries.

 

[jhm]

Oil And Gas Investors Tell Producers To Focus On Returns, Not Endless Growth

Carbon Tracker is going after executive compensation that incentivizes oil and gas production growth. Nice move.

 

[mspohr]

But... how do you ride on the roof of an electric train?

 

[jhm]

Barclays: Head-Spinning Volatility In Oil Will End | OilPrice.com

Barclays and BAML analysts think that the oil market will become less volatile. They think supply is adequate for demand in the near term and that supply is becoming more elastic.

If more oil producers focus on returns more than on volume growth, this would lead to greater price elasticity in oil supply. These analysts still do not recognize that demand is becoming more elastic too. As both supply and demand become more elastic, prices should become less volatile and lower. They should become lower too, because much of what allowed the oil industry to extract prices above a fully competitive market equilibrium depended on demand being inelastic. The formula for high oil prices was inelastic demand meets swing producer bent on maximizing the prices. So the swing producer had a near exclusive ability to express supply elasticity while other producers went along on the ride. What increasing supply elasticity means now, I think, is that more producers are making price dependent choices on whether to grow or shrink their production volume. This undermines the market power of the swing producer, and the price equilibrium should be less of a premium to perfect competition. As renewables and natural gas increasingly compete with oil, this makes oil demand more price sensitive too, also eroding the premium to perfect competition.

Brent has crept back up to $67/b. So this seems to be a more comfortable price for producers without being painfully expensive for consumers. So the question is whether all this price elasticity can keep prices within, say, $62 to $72 for awhile.

 

[TheTalkingMule]

I can't imagine the amount of marketshare the US frackers must be gaining. Production is still growing like mad and Saudi imports are down to a trickle . How long can Brent stay above $60 when the US buys nothing and China's economy is slowing?

US commercial stockpiles up another 5M to 455M barrels.

 

[neroden]

Barclays: Head-Spinning Volatility In Oil Will End | OilPrice.com

Barclays and BAML analysts think that the oil market will become less volatile. They think supply is adequate for demand in the near term and that supply is becoming more elastic.

Silliness.

Oil supply is elastic wtih a *time lag*, which is only partly buffered by storage. If demand goes up this week, supply goes up two years from now. This predictably leads to swings up and down (it's easy enough to do the math to show that this always happens). The only way to reduce volatility is for the *time lag* to go away (not happening) -- or for a cartel or regulator to fix prices or fix production.

Oil demand is of course more elastic than before, and with a shorter time lag than supply. That does mean that we should see recurrent gluts in oil, but the price will still swing.

 

[mspohr]

Silliness.

Oil supply is elastic wtih a *time lag*, which is only partly buffered by storage. If demand goes up this week, supply goes up two years from now. This predictably leads to swings up and down (it's easy enough to do the math to show that this always happens). The only way to reduce volatility is for the *time lag* to go away (not happening) -- or for a cartel or regulator to fix prices or fix production.

Oil demand is of course more elastic than before, and with a shorter time lag than supply. That does mean that we should see recurrent gluts in oil, but the price will still swing.

I think there is a lot of lag in demand also. When the price goes up, only some discretionary use is curtailed. Over time people will replace equipment with more efficient models but that can take years.