Shorting Oil, Hedging Tesla

[TheTalkingMule]

The Illinois State teachers pension fund is $75B underfunded, $6,000 from every man, woman and child wouldn't close the gap.

Crashing the entire oil & gas industry, plus the associated Wall Street investors, plus the type of nonsense above, plus massive reserve debt, plus crushing healthcare obligations ALL coming due around 2021.......is gonna wipe us out.

Or maybe it won't.

 

[Off Shore]

Your comment is funny but the article is quite scary for frackers in the next several years with the amount of money they have coming due.

@jhm's comment is funny because he and others have spent the last ~300 pages demonstrating exactly that.

 

[jhm]

Your comment is funny but the article is quite scary for frackers in the next several years with the amount of money they have coming due.

It's not just the money that's coming due. US shale is highly dependent on cheap credit. Companies that need to complete wells to make payments on past debt may find themselves unable to do so. It's very scary for frackers, but probably not scary enough to keep those who buy up the distressed assets from thinking they can try it again. Over half of US shale went bankrupt around 2015, and yet here we are again.

But I'm afraid this isn't the end. I suspect that US shale production won't peak until total global production peaks, which only happens within a few years of total oil consumption hitting its peak too. So frackers and investors will keep at it just as long as they think oil demand is still on the rise.

 

[jhm]

Relevance of PV with single-axis tracking for energy scenarios - ScienceDirect

Came across this paper from a tweet from one of the authors. It has a really important finding about deep decarbonization scenarios.

There are supporting technology like single-axis tracking systems for solar PV that enable solar not only to cut LOE (by 6% in this case) but to increase the value solar (tracking to enable more morning and evening sun to be produced in this case). The authors model global 100% renewable scenarios dominated by solar and wind. Without tracking solar generates 47% and wind 31%, total 78%. But when single-axis tracking is included in the mix, solar share jumps to 59% and wind drops to 21%, total 80%.

This is a pretty significant shift owing to just one value extending technology. Dual-axis tracking, bifacial PV, and higher density modules also help to capture more sun energy. Battery and other storage also extend the value of both solar and wind energy. I see batteries along with hydro and other storage supplying the bulk of the other 20% needed in a 100% renewable scenario.

Globally, there are a lot of edge cases to consider. But we can imagine a stylized grid as a fairly central case where 20% is generated from wind, 60% direct use solar, and 20% stored solar. This means pairing about 1 MW solar with about 1.5 MWh of storage so that about 25% of generated solar is available as stored energy. For incremental capacity pairing 2MWh storage with 1MW solar should be about right as an easy rule of thumb. Folks, this is quite doable.

So we need to pay attention to these supporting technologies that extend the value of renewables.

 

[jhm]

Is Big Oil’s Plastic Gamble A Misfire? | OilPrice.com

This is a good discussion about how little crude actually goes into plastic production. It's less than the amount of oil consumed in electricity generation.

Indeed, last year the International Energy Agency (IEA) put out a special report that warned that a surge in demand for petrochemicals will account for 5 million barrels per day (mb/d) of oil demand growth through 2040 at a time when oil consumption in cars has already begun to plateau.

Ok IEA. 5mb/d of growth over 20 years is just 250kb/d of growth per year. About 7.5 million EVs per year is enough to offset the growth from plastics. By 2022 we'll see EV sales reach about 8 million per year. It sounds downright silly to suggest that plastics growth will push the demand out to 2040.

 

[jhm]

Huge Battery Investments Drop Energy-Storage Costs Faster Than Expected, Threatening Natural Gas

RMI is anticipating battery costs drop to $87/kWh by 2025.

 

[jhm]

US Refiners Reduce Crude Processing For First Time Since 2009 | OilPrice.com

Hmm, fuel glut in Asia is pushing US refiners to reduce production levels. What a time for the US to become a net exporter of oil!

 

[Doggydogworld]

Relevance of PV with single-axis tracking for energy scenarios - ScienceDirect

Came across this paper from a tweet from one of the authors. It has a really important finding about deep decarbonization scenarios.

There are supporting technology like single-axis tracking systems for solar PV that enable solar not only to cut LOE (by 6% in this case) but to increase the value solar (tracking to enable more morning and evening sun to be produced in this case). The authors model global 100% renewable scenarios dominated by solar and wind. Without tracking solar generates 47% and wind 31%, total 78%. But when single-axis tracking is included in the mix, solar share jumps to 59% and wind drops to 21%, total 80%.

This is a pretty significant shift owing to just one value extending technology. Dual-axis tracking, bifacial PV, and higher density modules also help to capture more sun energy. Battery and other storage also extend the value of both solar and wind energy. I see batteries along with hydro and other storage supplying the bulk of the other 20% needed in a 100% renewable scenario.

Globally, there are a lot of edge cases to consider. But we can imagine a stylized grid as a fairly central case where 20% is generated from wind, 60% direct use solar, and 20% stored solar. This means pairing about 1 MW solar with about 1.5 MWh of storage so that about 25% of generated solar is available as stored energy. For incremental capacity pairing 2MWh storage with 1MW solar should be about right as an easy rule of thumb. Folks, this is quite doable.

So we need to pay attention to these supporting technologies that extend the value of renewables.

I'm a big fan of tracking systems. The morning/evening production is a huge deal. I was amazed to find out a year or two ago that the majority of utility-scale installations were single-axis trackers, yet the average price was still around $1/W. That's another reason I hate rooftop subsidies - with the subsidy on a typical rooftop system the gov't could buy the same amount of tracking watts outright. And output from the tracking system is more valuable!

I'm also a big fan of mid-day EV charging and evening V2H to eliminate the duck curve. You need EV batteries with high cycle life, of course, but Tesla/Dahn already solved that. That covers a huge portion of 8am-10pm usage with very little cost beyond the 2 cent/kWh tracking solar. Plus we eliminate gasoline! Two birds with one stone. At least across the southern and western US. The NW still has to use hydro, the midwest can supplement with cheap wind. Only the NE is left in the dark (ha). They should probably use hydro and nuclear (but won't) plus HVDC from areas with good solar.

 

[winfield100]

Relevance of PV with single-axis tracking for energy scenarios - ScienceDirect

Came across this paper from a tweet from one of the authors. It has a really important finding about deep decarbonization scenarios.

There are supporting technology like single-axis tracking systems for solar PV that enable solar not only to cut LOE (by 6% in this case) but to increase the value solar (tracking to enable more morning and evening sun to be produced in this case). The authors model global 100% renewable scenarios dominated by solar and wind. Without tracking solar generates 47% and wind 31%, total 78%. But when single-axis tracking is included in the mix, solar share jumps to 59% and wind drops to 21%, total 80%.

This is a pretty significant shift owing to just one value extending technology. Dual-axis tracking, bifacial PV, and higher density modules also help to capture more sun energy. Battery and other storage also extend the value of both solar and wind energy. I see batteries along with hydro and other storage supplying the bulk of the other 20% needed in a 100% renewable scenario.

Globally, there are a lot of edge cases to consider. But we can imagine a stylized grid as a fairly central case where 20% is generated from wind, 60% direct use solar, and 20% stored solar. This means pairing about 1 MW solar with about 1.5 MWh of storage so that about 25% of generated solar is available as stored energy. For incremental capacity pairing 2MWh storage with 1MW solar should be about right as an easy rule of thumb. Folks, this is quite doable.

So we need to pay attention to these supporting technologies that extend the value of renewables.

@jhm
By any chance had you seen Dr Richard Perez’s research?
I’ve been following him for a long time since he pointed out how the blackout of the Northeast US and parts of Canada could have been averted by (at that time) ~1/2 gigawatt of distributed PV at a lower cost that its prices at that time (and still be producing free electricity)
Main page
Perez.page
Page for 100% PV
http://www.asrc.albany.edu/people/faculty/perez/2016/BIG.pdf
He has been doing work for decades
Edit:
As I’m sure you are aware, it’s the cosine of the incident angle of the light.
The N/S axis changes with the seasons
The E/W axis changes during the day
Over the decades folks using trackers had a “rule of thumb”
That you could get ~30% extra by dual axis tracking
(And don’t whack your thumbs when installing)
PV was horrendously expensive 40-60+ years back, so folks used whatever to get those photons
Now I’m starting to see “ginormous” arrays popping up on houses everywhere
The Solar Decathlon started in 2002 with tiny PV arrays, the German students from Darmstadt covered 5 sides of a cube to get 19kW PV including louvers of windows (grad students)

 

[jhm]

Global LNG Markets Are Circling The Drain | OilPrice.com

The LNG market is shaped like a toilet.

Now we know how the Henry Hub price can stay low at low inventory levels. US producers may have to force the domestic market to absorb the surplus.

My long term view is that the LNG market is a big loser as renewables and batteries ramp up. For most LNG importing countries LNG is the most expensive marginal supply. So as RE scales up, LNG takes the hit.

 

[jhm]

All Eyes On China As Oil Demand Dwindles | OilPrice.com

This article sounds as if some people are coming around to seeing the conundrum we've been talking about.

Despite oil prices trading in a range that should have stimulated a notable improvement in consumption, the world actually consumed just 1.6 percent more oil between June and August this year than last, data from the Joint Organisations Data Initiative has shown.

The expectation of tightening supply leading to higher prices is not new. It’s been around for a while, but supply has yet to tighten enough to push prices substantially higher. It is also doubtful this will ever happen: large importers have become sensitive to price movements, and some of them—China specifically—have used the lower-for-longer situation to fill up its oil storages, so it can stop buying the moment prices become uncomfortably high. This would in turn push them back down.

The spike in oil consumption in China is easily explained: a 400,000-bpd new refinery came on stream in May this year and another one with the same capacity was put into operation later. This spurred a jump in oil imports that may not reflect consumption trends accurately or simply do not fit with economic growth figures.

In this context, any pickup in demand next year is likely to be in response to lower prices, as long as they fall low enough. Reports of another OPEC+ cuts extension, however, make this unlikely, unless traders factor in the cuts extension. It has happened before with OPEC cuts, which have seen prices fall rather than rise.

So here the thing, demand is down just about everywhere. It was up in China because two new refineries have come on line. Clearly this new capacity needs to fill up their tanks, but where will the product go. There is a surplus of gasoline and diesel in Asia. So the boost in demand for crude from these new refineries is transitory.

So global demand is weakening. The industry is faced with a conundrum: would you rather have high price and decline in consumption or lower prices with tepid growth in consumption. China can easily back off on imports that flow into storage when the price is high. The idea that consumption is becoming less responsive to lower prices suggest that the demand curve is shifting.

So what's an oil industry to do?

 

[dc_h]

This just grabbed me. Photosynthesis uses photons from the sun to supply the energy required to move the electrons from the oxygen to the carbon and the result is a stable storage medium for the energy: cellulose.

Yes! I think this should be something bipartisan. Bio-chemical and bio-engineered plastics and polymers. These would be more degradable then crude oil based products and would be great for rural America. Helps farms and creates small to medium sized industry around the farms and making food packaging material near food production.

 

[mspohr]

Yes! I think this should be something bipartisan. Bio-chemical and bio-engineered plastics and polymers. These would be more degradable then crude oil based products and would be great for rural America. Helps farms and creates small to medium sized industry around the farms and making food packaging material near food production.

Trees, paper, cardboard. KISS

 

[SwTslaGrl]

Russian President Vladimir Putin and Chinese leader Xi Jinping launch Monday a gas pipeline that is the first of three ambitious projects intended to cement Moscow's role as top gas exporter.

TurkStream, which Putin and Turkish leader Recep Tayyip Erdogan hope to launch in January, is to transport Russian gas to Turkey.

Nord Stream-2, which would double Russian gas volumes to Germany, is expected to go online in mid-2020.

Russia cements role as gas 'kingpin' with 3 new pipelines

 

[SebastianR]

Not directly oil, but still fossil fuel:

Coal power becoming 'uninsurable' as firms refuse cover

If less and less insurances cover coal plants, how long will it take until we see the same of refineries, gas peakers and other oil infrastructure?

This might be an interesting piece of leverage to hit - how can we remove as much insurance market for fossil fuels as possible?

 

[TheTalkingMule]

Raising prices in a glut?

Saudi raises light crude prices to Asia to six-year high

How does all this fit into the January lower sulfur rule change for shipping?

Separately, I'm hearing the old Hovensa refinery in St Croix is now re-opening under ArcLight specifically to "take advantage" of these new regulations. Adding capacity to a refining sector that's already deep in the red?

Raising prices.....adding refining capacity....don't both these moves make the plateauing market even more crowded?

 

[jhm]

Not directly oil, but still fossil fuel:

Coal power becoming 'uninsurable' as firms refuse cover

If less and less insurances cover coal plants, how long will it take until we see the same of refineries, gas peakers and other oil infrastructure?

This might be an interesting piece of leverage to hit - how can we remove as much insurance market for fossil fuels as possible?

There are two issues here. First there are the specific hazards that an insured asset faces. Climate change can intensify those risks. Second, there are the hazards to all other assets an insurance companies covers. Climate change also intensifies risk to the rest of the portfolio. What's not clear is how much of the latter might be driving the insurability of assets that contribute to climate change. That is, even if you could adequately price for risks to the coal plant, would you want coal plants in operation to increase the risk to, say, homes, businesses and autos facing things like increased risk of fires, floods and hurricanes?

We've seen home insurers exit parts of California in the wake of forest fires. Climate change is leading to a situation where some homes in the wrong locations become uninsurable. While this step may protect the insurers from future unexpected claims, they still are losing their portfolio of business.

It also looks extremely uncool to drop homeowners with risking climate risk issues while continuing to insure fossil industries. At a minimum, this is a PR liability that that climate activists can exploit.

All told, insurance companies are on the frontlines of facing the financial risks that climate change poses. Their books of business will shrink, unexpected losses will rear up, catastrophic tail risks could overwhelm the entire industry, and if they persist is supporting fossil industries and heavy emitters, they could suffer reputational damage as well. So is it prudent to underwrite an oil refinery or gas pipeline? Perhaps shareholders in those industries could shoulder those risks.

 

[TheTalkingMule]

Ryan Lance, CEO ConocoPhillips, is on Bloomberg touting their support if a carbon tax. We have all these political figures railing on and on about climate change.....where is our carbon tax bill? The House is blue, no?

I'll take this to the Energy or Politics forums, but thought it was an interesting oil-centric tidbit. We're seeing more vocal support of a carbon tax from oil & gas than the Dems in Congress.

 

[replicant]

Ryan Lance, CEO ConocoPhillips, is on Bloomberg touting their support if a carbon tax. We have all these political figures railing on and on about climate change.....where is our carbon tax bill? The House is blue, no?

I'll take this to the Energy or Politics forums, but thought it was an interesting oil-centric tidbit. We're seeing more vocal support of a carbon tax from oil & gas than the Dems in Congress.

My understanding is that a carbon tax could subsidize their gas business while we are retiring coal plants. Some says it's for the best as it speeds up the transition from this coal disaster, but many fear it's just helping the O&G industry to build as many gas-fired power plants as they can and avoid a leapfrog to renewable energy. Once paid for, it won't be easy for political to escape the sunk cost fallacy and retire our new, shiny pipelines and power plants.

 

[canoemore]

Ryan Lance, CEO ConocoPhillips, is on Bloomberg touting their support if a carbon tax. We have all these political figures railing on and on about climate change.....where is our carbon tax bill? The House is blue, no?

I'll take this to the Energy or Politics forums, but thought it was an interesting oil-centric tidbit. We're seeing more vocal support of a carbon tax from oil & gas than the Dems in Congress.

I've been wondering how sincere these calls for a carbon tax from these figures in the fossil fuel industry really are. It certainly doesn't seem aligned with their interests, which makes me suspicious that it's just PR designed to limit backlash against them as the public becomes more aware of how damaging their business has been and continues to be, not to mention the lengths to which they've gone to obfuscate the truth about climate change. But maybe there are real incentives for these companies to be calling for such a tax that I haven't considered?

Edit: Ah, I see @9837264723849 suggests an explanation.