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Shorting Oil, Hedging Tesla

Discussion in 'TSLA Investor Discussions' started by jhm, Mar 15, 2016.

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  1. jhm

    jhm Well-Known Member

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    Yes, Harry writes some good stuff. He comes from the oil industry background, but it pretty clear on the disruption that is taking place. I've posted links to his stuff here, including the Carbon Tracker piece of which he was the co-author. Very good to follow.
     
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  2. renim

    renim Active Member

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    Or perhaps, saudi is having a special deal for all those ex-iran customers.

    Im sure both usa and saudi are pleased for iran's oil customers to go with saudi supply.
     
  3. jhm

    jhm Well-Known Member

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  4. TheTalkingMule

    TheTalkingMule Distributed Energy Enthusiast

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    It's almost as if US, Saudi and multinational corporate oil interests are conspiring to limit outside production in an already oversupplied market.

    As I've been saying for years....the only logical solution to the fossil industry's problem is something on the scale of global warfare. This is the beginning of the appetizer course where Iran/Venezuela and al the other easy targets are disrupted. Wonder what the next plan is for 2021 when a demand peak starts to appear on the horizon?
     
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  5. jhm

    jhm Well-Known Member

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    Solar’s stunning rise takes big chunk out of coal in daytime market

    [​IMG]

    This is a stunning chart! Shows the y/y change in Q1 Australian power generation. You can see which generators are winning and losing market share by hour of the day.

    Clearly solar is the big winner and coal the big loser. But notice also that gas is only gaining where solar resources are the weakest, and this is also where coal is hanging on. So there is very little evidence that gas is taking market share away from coal. Rather solar is taking share directly away from coal in daylight hours.
    Wind for it's part appears to helping to keep gas from gaining too much share in the evening and night hours.

    Hydro is down this year for reason of drought. In a year with more rainfall, coal and gas will get squeezed.
     
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  6. TheTalkingMule

    TheTalkingMule Distributed Energy Enthusiast

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    Amazing chart. Also shows how battery capacity is going to directly disrupt gas in very short order. Aussies should see their bills going down for good soon.
     
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  7. TheTalkingMule

    TheTalkingMule Distributed Energy Enthusiast

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  8. renim

    renim Active Member

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    Why should it bust? My country's stockpile as mostly disappeared over the same time frame. I suspect many countries without oil shale have also seen their ability to stockpile (days import) vastly reduced over the past 2 decades.
     
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  9. TheTalkingMule

    TheTalkingMule Distributed Energy Enthusiast

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    The US is by far the largest consumer of crude oil in the world, has peaked demand, and has doubled our domestic production in the last 8 years. Our domestic stockpiles have never been higher and production growth has shown no sign of slowing.

    chart(13).png

    China's growth has slowed dramatically. OPEC+R has held back production as much as is politically and economically possible for the last 4 years. Global consumption growth for 2019 has been revised all the way back to +1.2Mb/d and will likely land south of 1Mb/d.

    All these drone/pipeline/Iran war/Venezuela "disruptions" are in fact having minimal impact on the global oversupply.

    What about any of that implies a price premium should be applied for spot purchases or futures 2-3 years out? The same false narrative has been throw out there for the past 2 years and US production continues it's rocket growth pace. That's a price bubble, no?
     
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  10. adiggs

    adiggs Active Member

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    This article makes it sound like Nick's been reading this thread :)
    Peak Gasoline Vehicles Is Already Here | OilPrice.com

    First time I've seen somebody emphasizing the when EV's would take the overall market growth away from gas cars.

    2019 - peak gas car. You read it here before now; now you've seen it on oilprice.
     
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  11. renim

    renim Active Member

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    Crude Oil Imports by Country

    American sits between china and india as an oil importer, if we include canada as north america, then north america is probably below india as an importer.

    So tell me, what is your prognosis for india's oil imports? Because im pretty sure that the disconnect between wti and brent is evidence that globally brent etc are more important.

    North America relevance to global oil seems to diminish every month (mostly for good reasons for USA), interesting times
     
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  12. jhm

    jhm Well-Known Member

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    About half of the price collapse from the last glut happened in the second half of 2014, while the reserve was comfortably around 350 mmb. The then bottom fell out pushing WTI below $30/b in Jan 2016, and stock soars above 450mmb. I think this expanded storage capacity in this country.

    Right now there are geopolitical risks that make storing oil in an interesting bet on supply disruption. But testing the 500mmb level looks pretty risky to me. Remember that the oil price can drop substantially before stock shoots up to new levels. Also there is interest rate risk associated with parking so much oil. An increase in interest rates would increase the cost to carry oil. This could flip oil futures back into contango causing the spot price to plunge. There is already a very near term contango.
     
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  13. TheTalkingMule

    TheTalkingMule Distributed Energy Enthusiast

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  14. TheTalkingMule

    TheTalkingMule Distributed Energy Enthusiast

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    We should have hit our seasonal stockpile peak about 3 weeks ago. China may start actually selling treasuries soon. The whole oil industry has been bulletproof for the last 3 years, but we have to be close to a tipping point they can't control.

    It would take US producers slowing growth to avoid the whole thing going off a cliff, I don't see that happening. There's just too much money to be made in a very tight window that will never open again.
     
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  15. neroden

    neroden Model S Owner and Frustrated Tesla Fan

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    The US shale producers are actually on what is practically a Ponzi scheme treadmill -- they have to keep increasing growth in order to get the next round of suckers in so they can keep collecting their salaries and bonuses. If they don't manage to keep getting fresh "dumb money", they end up like Aubrey McClendon. The thing is, since almost none of the shale oil is profitable, it's pretty much guaranteed that it's going to blow up for all of them. The question is when the dumb money runs out.
     
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  16. jhm

    jhm Well-Known Member

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    Presently all construction contributes about 3.3% to US GDP. Historically it ranges from about 2.6% to 4.6%. Think about how well the national and global economies absorbed the housing crisis of 2008. That home prices were inflated and the housing market overbuilt forced the whole financial sector into disarray, threatening the whole economy and requiring massive government bail out of the financial industry. This is precisely the sort of disaster that central banks need to safeguard against.

    Saying oil contribute only 3-6% to GDP means little. Oil related assets are at a substantial multiple to oil income, just like building assets are at a substantial multiple to annual construction revenue. In fact, the EV/EBITDA for Oil and Gas Industry is about 6.72 (https://www.stock-analysis-on.net/NYSE/Company/Chevron-Corp/Valuation/EV-to-EBITDA). Multiplying this by 3-6%, implies O&G assets are worth about 20-40% of global GDP or $16T to $32T on a $80T global GDP. The impact of declining asset valuations can be huge and systemic, well beyond the annual contribution to GDP.

    Global GDP growth is typical in range of 2-4%. Let suppose that O&G assets have been priced at $24T, but lose 10% of value in one year. Not looking at all the knock on effects like shutting down the whole economy in certain oil export countries, this is nominally a $2.4T hit to a $80T. This is a 3% shock to GDP, enough to send an otherwise moderately healthy global economy (3% growth) into a recession (defined as negative growth for two or more quarters. But as I mentioned this ignores knock on effects and other concomitant effects. Likely the auto industry would be seeing massive losses at the same time as we approach peak oil. Note also that this $2.4T correction is hitting the value of O&G equity and debt. So financial institutions would be holding bunch of this as debt. It becomes even riskier to hold as equity valuations plummet too. Financial institutions will be taking a hit, which could tighten up credit markets, as was the response to the mortgage crisis.

    So basically, I don't think the global economy could sustain a 10% correction in oil & gas assets in a single year without slipping into a global recession.
     
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  17. jhm

    jhm Well-Known Member

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    Need to cross-post this because it is significant to the question of peak oil.

    The 1TWh battery capacity mark is pretty close to where peak oil demand happens.

    1TWh of batteries is in the neighborhood of displacing 1mb/d of oil demand.
     
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  18. neroden

    neroden Model S Owner and Frustrated Tesla Fan

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    Isn't 2023 the same year where our other two models were pointing to peak oil demand as well?
     
  19. jhm

    jhm Well-Known Member

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    Yup.

    Some portion of this capacity is going to non-automotive uses. So it is bit hard to say if 1TWh is the magic threshold, but even some of the non-automotive use will offset oil demand too. I'm thinking of things like stationary batteries on islands replacing power from diesel gensets, lawncare equipment, scooter/bikes, and of course ferries.

    At any rate, it is reassuring that capacity appears to be running apace to a 2023 peak.
     
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  20. jhm

    jhm Well-Known Member

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