Shorting Oil, Hedging Tesla

[ggr]

FWIW
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'Made in China 2025' forges ahead with EV dominance in sight

ancillary to the article, is the history, during the past decade, battery leadership has approximately followed
AESC was the first to leadership, with Nissan
LG Chem, then took leadsership with Renault and GM Volt
BYD then broke cover with their own range of new energy vehicles, (taking leadership)
Panasonic reascended to leadership via Tesla
now CATL leads due to being China Inc's goto supplier for batteries, having fought through a brutally competitive internal field.

Interesting, because Tesla claims GF1 is producing about 28GWh at the moment, although some of that is going into fixed storage and not cars. But S/X use about 100,000 cars worth of 18650 cells, with each car taking, say, 90kWh on average, which is another 9GWh. Chart shows 23GWh for Panasonic. 28+8-23 = 13GWh of Panasonic cells going into fixed storage for Tesla alone!

Also, at least some other EVs use Panasonic cells, don't they? Maybe only in very small numbers, I don't know.

In other words, I think the number for Panasonic is wrong.

 

[mspohr]

Interesting, because Tesla claims GF1 is producing about 28GWh at the moment, although some of that is going into fixed storage and not cars. But S/X use about 100,000 cars worth of 18650 cells, with each car taking, say, 90kWh on average, which is another 9GWh. Chart shows 23GWh for Panasonic. 28+8-23 = 13GWh of Panasonic cells going into fixed storage for Tesla alone!

Also, at least some other EVs use Panasonic cells, don't they? Maybe only in very small numbers, I don't know.

In other words, I think the number for Panasonic is wrong.

S/X cells come from Japan

 

[ggr]

S/X cells come from Japan

Yes. The table says "Panasonic (Japan)". So where is "Panasonic (USA)", or "Tesla (USA)", which should be near the top of the list? I don't understand your point, I'm just saying that Panasonic clearly produces many more cells worldwide than that table indicates.

 

[Oil4AsphaultOnly]

Interesting, because Tesla claims GF1 is producing about 28GWh at the moment, although some of that is going into fixed storage and not cars. But S/X use about 100,000 cars worth of 18650 cells, with each car taking, say, 90kWh on average, which is another 9GWh. Chart shows 23GWh for Panasonic. 28+8-23 = 13GWh of Panasonic cells going into fixed storage for Tesla alone!

Also, at least some other EVs use Panasonic cells, don't they? Maybe only in very small numbers, I don't know.

In other words, I think the number for Panasonic is wrong.

Not really. Panasonic supplies the batteries for ALL of Toyota's hybrids, so there's a few GWh's there. Don't have a definite number on hand though.

 

[TheTalkingMule]

Yes. The table says "Panasonic (Japan)". So where is "Panasonic (USA)", or "Tesla (USA)", which should be near the top of the list? I don't understand your point, I'm just saying that Panasonic clearly produces many more cells worldwide than that table indicates.

I believe they're bundling all Panasonic production into one figure. Japan is simply indicating the home of the company.

 

[Doggydogworld]

Interesting, because Tesla claims GF1 is producing about 28GWh at the moment...

The chart is 2018. Panasonic made ~9 GWh for 100k S/X and ~12 GWh for 155k Model 3s. They made less than a GWh for Tesla Storage. I don't know if their total includes cells for Toyota, PEVE ownership has shifted back and forth over the years.

 

[RobStark]

Usually, these charts include PHEV but not HEV batteries.

It would include Prius PHEV but not regular Prius.

 

[RobStark]

Per Nikkei article China plans to reduce oil consumption from the automotive sector by 40% from 2015 to 2025.

 

[Doggydogworld]

Per Nikkei article China plans to reduce oil consumption from the automotive sector by 40% from 2015 to 2025.

I could perhaps see a 40% reduction in average new car consumption, but 40% for the fleet? That wouldn't happen even if EVs took over 100% of the market next year.

Also, with all the product shipping globally these days crude oil imports has become pretty meaningless. US net petroleum imports are down dramatically. We aren't self-sufficient, because we export a lot of NGLs and have to import transportation fuels. But we're much closer to net zero than China.

 

[neroden]

Per Nikkei article China plans to reduce oil consumption from the automotive sector by 40% from 2015 to 2025

They're already four years into that. So that'll be tough.

But I think they can do it, because China uses big-stick methods like banning gasoline car registrations. They've already put 10 times as many electric buses on the road as the rest of the world combined, which probably accounts for a pretty decent percentage of the target.

 

[jhm]

Next they'll be saying that renewables make sense up to 90%. When renewables are at over 100% of electricity needs (which they will be -- they'll get overbuilt and batteries will store the excess), I think that's when the oil strategists will get up.

I see your 100%, raise you to 150% so that electrolyzers to can attack hard-to-electrify demand for gasses.

 

[mspohr]

How Climate Change Could Trigger the Next Global Financial Crisis

Global warming, he said, could send the world economy spiraling into another 2008-like crisis. He called for central banks to act aggressively and immediately to reduce the risk of climate-related catastrophe, taking the warming planet as seriously as they would a cooling economy.

I talked with Tooze last week about whether climate change could really cause another global crash, how to think about climate policy in history, and what the Fed could do to decarbonize the economy. Our conversation has been edited for length and clarity.

 

[mspohr]

The Fracking Industry Is in Debt. Retirement Funds Are Helping Bail It Out.

In December 2017, The Wall Street Journal found that shale producers had spent $280 billion more than the oil and gas they sold was worth between 2007 and 2017, the first 10 years of the shale drilling rush.

Other large pension funds have concluded that the oil and gas industry carries too much economic risk to make for a sound long-term investment — even without taking climate change into account. This March, Norway’s $1 trillion Government Pension Fund Global announced that it would be divesting from oil and gas exploration firms, a move affecting $7.125 billion worth of its holdings.

While the shale drilling industry’s financial instability may not be so large as to pose an overall risk to the financial system, “I think there’s risk to pension plans that are pouring their money into private equity firms, which in turn are pouring billions into shale companies,” Bethany McLean, author of the book Saudi America: The Truth about Fracking and How It’s Changing the World, told E&E News in a September 2018 interview. McLean is also widely credited as the first financial reporter to take a critical look at energy company Enron before its collapse.

 

[dc_h]

Interesting, because Tesla claims GF1 is producing about 28GWh at the moment, although some of that is going into fixed storage and not cars. But S/X use about 100,000 cars worth of 18650 cells, with each car taking, say, 90kWh on average, which is another 9GWh. Chart shows 23GWh for Panasonic. 28+8-23 = 13GWh of Panasonic cells going into fixed storage for Tesla alone!

Also, at least some other EVs use Panasonic cells, don't they? Maybe only in very small numbers, I don't know.

In other words, I think the number for Panasonic is wrong.

Wouldn’t 100,000 cars a quarter be 6 to 7GWh of batteries, leaving only about 1Gb of Panasonic for Tesla Energy?

 

[TheTalkingMule]

Meanwhile back in the oil world.....Permian stocks are cratering. Are we seeing the beginning of the end?

Iran is stockpiling oil in Chinese ports. What happens if 60M barrels are released from "storage" next week and Iran makes a deal with Iran to soak up all their supply through 2022? Certainly prices drop 20% and Permian operators start restructuring/consolidating.

I think we're now in the 18-36 month window in which the market will fully realize and value looming peak demand. We can soon connect all the dots on erroding oil demand growth and the market will devalue reserves just like coal.

I guess I'll wait and hope these Permian players can rebound a bit then short?

 

[jhm]

Why solar, wind and EVs will be the death of the petroleum industry | RenewEconomy

This summarizes some really critical analysis from the French bank BNP Paribas. The bank finds that $4.6T to $5.2T investment in wind, solar and EVs over the next 25 years can deliver as much mobility as $25T investment in oil, gasoline and diesel. The substantial capital efficiency of the renewable/EV investments make these investments "irresistible" for capital and puts oil investment assets at substantial risk.

Actually, I think their assumptions around diesel vehicles are unrealistic favoring diesel. They assume that diesel LDVs are 35% efficient. Diesel gensets used by utilities are only 33% efficient and suffer no transmission or braking losses. So the analysis substantially overstates the mobility useable energy that a vehicle can derive from diesel. Even so, the conclusion is still pretty much the same. Oil above $20 can't compete.

I would also point out that this analysis ignores the substantial investment that must be made in the battery supply chain to pull this off. So they get a 6 fold improvement capital efficiency by ignoring shifts to non-energy investments. I have done my own analyses into these investments and believe that even batteries are much more capital efficient. The important thing for professional investors to understand is that the underlying economics will in time shift investments away from oil and into renewables and batteries. The tricky thing is knowing just how quickly this shift will happen, but from a capital efficiency perspective we have high confidence that this is inevitable. As long as investors are willing to suffer poor return on capital invested in oil, the pace is slowed somewhat. But once the investment community is done wasting capital on oil, the shift could be rapid and severe.

 

[TheTalkingMule]

Can we talk about leverage again? Globally, this rate drop should be the last piece of the puzzle to make sure all fossil interests double-down on debt/opex/exploration through 2020. I know you guys keep saying oil & gas is only X% of the global economy, but we're brewing up a perfect storm here.

If derivatives of the US housing market fueled the last over-leveraging, what do you think's gonna happen when all oil assets go to zero on September 4th, 2021? As @neroden says, this record expansion is only possible due to exponential growth in cheap renewables. The other side of that coin is it's allowing oil & gas to keep leveraging itself far far beyond where it might normal dramatically correct.

I'm buying a last bit of TSLA while it's cheap just in case the world doesn't end, then moving to strictly oil deathwatch shorting. Obviously then buying in the rubble of the aftermath.

 

[jhm]

Oil Price Correction Triggers Shale Meltdown | OilPrice.com

Well, there's this little meltdown.

WoodMac noted a panel of 7 shale drillers are burning through 1.58B cash in Q1 this year, 4X faster this year than the same period a year ago. Workforce reductions are not stopping the bleeding.

This article is about shale crude. Brent is falling below $60/b, but have we noticed that natural gas too is falling below $2.1/mmBtu?

Oil majors have been stepping in to buy up shale assets from shaky producers. Is that just savvy opportunism, or could this be a bailout to forestall an even greater loss of investor confidence?

 

[adiggs]

...
Oil majors have been stepping in to buy up shale assets from shaky producers. Is that just savvy opportunism, or could this be a bailout to forestall an even greater loss of investor confidence?

This is the thing about buying up distressed assets before a bottom is found (how do you know you've found the bottom anyway) - there's always a LOT lower that things can, in theory, go. Whenever I forget that, I remind myself of Mr. Peterson, of the company with the 700,000 for 1 reverse split, that moved the stock price from 1 penny to .. 1 penny.

The idea that somebody might be consciously buying up assets for cheap, for the purpose of propping up confidence - that hadn't occurred to me. Good luck with that . (Not you @jhm of course)

 

[mspohr]

Oil Needs to Fall Below $20 to Compete With Green Alternatives  |  Peak Oil News and Message Boards

Oil will have fall to $9-$10 a barrel in the long-term in order for gasoline to remain competitive with clean power for transport, and to $17-$19 a barrel for diesel, Mark Lewis, global head of sustainability research at BNP’s asset management unit, said in a research report. U.S. benchmark crude was trading at about $55 in New York on Monday.

Our analysis leads to a very stark conclusion for the oil industry: for the same capital outlay today, wind and solar energy will already produce much more useful energy for EVs than will oil purchased on the spot market,” Lewis said. “These are stunning numbers, and they suggest that the economics of renewables in tandem with EVs are set to become irresistible over the next decade.”