Shorting Oil, Hedging Tesla

[willow_hiller]

Tesla is in talks with police department to use Sentry Mode for policing needs - Electrek

Ok this is cool. I get that policy will want to use sentry mode and avoid having to load up a patrol car with extra video.

What is cool is that the 310 mile range of the performance version provides twice the average range that a patrol car uses in a day. This will save them $13k in fuel costs over 3 years and the will likely avoid much of the $11k maintenance cost over the first 3 years. So this works out to be about 55k miles per year.

Guess what happens after three years and 165k mile when they discover that the vehicle performs almost just as well as when it was new? Maybe the range has declined to 300 miles. But that is no reason to replace the car. I'm thinking they will discover that they can get over twice the lifetime miles.

Truly this is an application that can benefit from a million mile drivetrain. Just getting 500k miles over 9 years would represent a major cost reduction to law enforcement agencies. There is some seriously reliable demand here, once law enforcement figures out just how good the TCO over an extended life is.

It's also an application that will displace 4X as much fuel per vehicle-year as private ownership. So look out crooked oil, the cops are on your tail.

I always thought that Tesla should develop an entire police specific firmware.

For e.g. looking at some of greentheonly's Autopilot view, the car knows the speed of all vehicles around you. It would be relatively simple for Tesla to allow police to see estimated vehicle speeds superimposed on the Autopilot UI. Record that metadata along with a scan from the forward facing radar, and suddenly the Model 3 comes a replacement for the radar gun.

 

[Off Shore]

I always thought that Tesla should develop an entire police specific firmware.

For e.g. looking at some of greentheonly's Autopilot view, the car knows the speed of all vehicles around you. It would be relatively simple for Tesla to allow police to see estimated vehicle speeds superimposed on the Autopilot UI. Record that metadata along with a scan from the forward facing radar, and suddenly the Model 3 comes a replacement for the radar gun.

No civil liberties concerns here, uh-un, nope, not a one.

 

[jhm]

I always thought that Tesla should develop an entire police specific firmware.

For e.g. looking at some of greentheonly's Autopilot view, the car knows the speed of all vehicles around you. It would be relatively simple for Tesla to allow police to see estimated vehicle speeds superimposed on the Autopilot UI. Record that metadata along with a scan from the forward facing radar, and suddenly the Model 3 comes a replacement for the radar gun.

Yeah, that's a cool idea. I also think the neural net could be trained to anticipate police behavior to know when to pull someone over and why. (This could help FSD drive in a manner as to avoid getting pulled over.) But more generally, I think that FSD could free up officers to be more focus on observing and other policing tasks.

 

[Oil4AsphaultOnly]

I always thought that Tesla should develop an entire police specific firmware.

For e.g. looking at some of greentheonly's Autopilot view, the car knows the speed of all vehicles around you. It would be relatively simple for Tesla to allow police to see estimated vehicle speeds superimposed on the Autopilot UI. Record that metadata along with a scan from the forward facing radar, and suddenly the Model 3 comes a replacement for the radar gun.

I hope not. Last thing I want to do is fight a speeding ticket that was made possible by one of my investments. That would make for some mental anguish!

 

[jhm]

I hope not. Last thing I want to do is fight a speeding ticket that was made possible by one of my investments. That would make for some mental anguish!

The escalation of technology cuts both ways. Tesla can make money helping speeders avoid tickets just as it can help law enforcement issue citations.

 

[jhm]

Is A New Price War Looming For OPEC? | OilPrice.com

Apparently the OPEC strategy is just to keep cutting production until US shale reaches its production peak.

I guess they think they've got geology on their side.

It's interesting that Robert Rapier is coming around on EVs and peak oil demand. He just doesn't think it will happen in the next 5 years!

At any rate OPEC is trying to straddle 2 peaks. Why should they bank on peak US shale happening sufficiently in advance of peak oil demand?

But what choice do they have? Well, peak US shale is an economic event, not a geological event. If the cost of capital goes up, that's as inhibitive as lower oil prices. The very fact that OPEC can be relied upon to shore up the price of oil actually helps keep the cost of capital low. So maybe they should just stop reassuring the market all the time. They don't have to go to war. They just have to raise the white flag of surrender, saying, "Demand has become so elastic we can no longer prop the price up. Please don't count on OPEC to do something it is no longer capable of doing. All producers need to take responsibility not to oversupply the market." Investors need to get the message.

 

[Oil4AsphaultOnly]

Is A New Price War Looming For OPEC? | OilPrice.com

Apparently the OPEC strategy is just to keep cutting production until US shale reaches its production peak.

I guess they think they've got geology on their side.

It's interesting that Robert Rapier is coming around on EVs and peak oil demand. He just doesn't think it will happen in the next 5 years!

At any rate OPEC is trying to straddle 2 peaks. Why should they bank on peak US shale happening sufficiently in advance of peak oil demand?

But what choice do they have? Well, peak US shale is an economic event, not a geological event. If the cost of capital goes up, that's as inhibitive as lower oil prices. The very fact that OPEC can be relied upon to shore up the price of oil actually helps keep the cost of capital low. So maybe they should just stop reassuring the market all the time. They don't have to go to war. They just have to raise the white flag of surrender, saying, "Demand has become so elastic we can no longer prop the price up. Please don't count on OPEC to do something it is no longer capable of doing. All producers need to take responsibility not to oversupply the market." Investors need to get the message.

But aren't the fiscal budgets of all OPEC nation's dependent on the sale of oil? Cutting production literally translates to budget shortfalls. How long can they keep that up, before their citizens revolt?

 

[jhm]

But aren't the fiscal budgets of all OPEC nation's dependent on the sale of oil? Cutting production literally translates to budget shortfalls. How long can they keep that up, before their citizens revolt?

Well, they're willing to forego some volume to avoid an even larger shortfall of revenue through a lower price of oil. But clear as the share of OPEC declines, the cuts can become bigger on a relative basis to obtain smaller boost in price. So eventually the tradeoffs don't not work. This is a loss of market power. But believe there is something greater going on here than mere loss of market power. Specifically, I believe demand is becoming more elastic as demand growth is weakening. Both loss of market power and increased demand elasticity moves the equilibrium price from an olagopolistic premium toward a competitive market price. I think demand elasticity is the greater of the two drivers, but what OPEC is attempting to do is to fight the impact of elasticity by trading off market power. So that is a very longwinded way of saying that I think this strategy ultimately leads to lower oil prices.

Inevitably prices come down to a competitive market equilibrium, despite the best efforts of a cartel to forestall that inevitability. It is happening because there are now alternatives for substantial portions of the barrel.

 

[winfield100]

[QUOTE="jhm, post: 4290714, member: 25323" I think demand elasticity is the greater of the two drivers, but what OPEC is attempting to do is to fight the impact of elasticity by trading off market power. So that is a very longwinded way of saying that I think this strategy ultimately leads to lower oil prices.

Inevitably prices come down to a competitive market equilibrium, despite the best efforts of a cartel to forestall that inevitability. It is happening because there are now alternatives for substantial portions of the barrel.[/QUOTE]

made 17,420kWh/yr (17.4Mwh/yr) from _free_ sunshine
Drove my PHEV around local neighborhood, saw at least 10 more houses with giant PV arrays doing the same, collecting sunlight to power their residences AND saw —>2 <—. Tesla model 3’s
It’s accelerating
(I also make almost 2x my needs)

 

[dc_h]

Is A New Price War Looming For OPEC? | OilPrice.com

Apparently the OPEC strategy is just to keep cutting production until US shale reaches its production peak.

I guess they think they've got geology on their side.

It's interesting that Robert Rapier is coming around on EVs and peak oil demand. He just doesn't think it will happen in the next 5 years!

At any rate OPEC is trying to straddle 2 peaks. Why should they bank on peak US shale happening sufficiently in advance of peak oil demand?

But what choice do they have? Well, peak US shale is an economic event, not a geological event. If the cost of capital goes up, that's as inhibitive as lower oil prices. The very fact that OPEC can be relied upon to shore up the price of oil actually helps keep the cost of capital low. So maybe they should just stop reassuring the market all the time. They don't have to go to war. They just have to raise the white flag of surrender, saying, "Demand has become so elastic we can no longer prop the price up. Please don't count on OPEC to do something it is no longer capable of doing. All producers need to take responsibility not to oversupply the market." Investors need to get the message.

Peak ICE was 2017, it will be interesting and perhaps soon measurable the lag for peak oil. Car sales will decline year over year until EVs hit about 1/3 of sales, then EV sales will rise numerically faster then ICE sales decline. I think Tesla will end 2020 close to 800k rate and close to 1.5 million end of 2021. Optimistic perhaps, but at 17% market share(historic avg) it implies over 4 million Ev rate next year and 7.5 in 2022 and 27 million by 2025 when sales would start to rise again. Robots might change that, but peak oil should coincide closely with the transition to EV domination which should start in 2024-25.
I haven’t researched this in detail, but thinking how the transition plays out. People defer purchases for new product, which is in short supply, so sales decline. Eventually new product supply catches demand and new equilibrium is achieved. If there is a price and quality leader, like apple in smart phones, you should expect a long path of profitability for the new leader and a long path of declining profits and bankruptcy for the flip phone guys, in this case Exxon and the general oil and gas industry. I think their last good chance to stop Tesla and EVs was last year. With Tesla passing 500k rate in Q1 or 2 and 1 million in 2021 they will be self funding and gaining political power as local govt courts new plants and development.

 

[mspohr]

Are We In Peak Oil Demand?

 

[TheTalkingMule]

If we get the long overdue global recession any time soon, peak demand will probably be fall 2021. Crazy.

IEA is sticking to their 2019 growth figure of 1M barrels though it almost certainly will total something like 600-850k when all is tallied, way down from the 1.6M projected as recently as May. For 2020 they have at 1.2M as a growth projections, but there's zero reason to think it'll be more than this year's growth. As @jhm has said many times, these nonsense projections are quoted as fact by gov't and really hinder proper transition planning.

Any way you slice it, I see no way real peak oil demand goes past 2024/25. Like nearly 0% chance.

 

[ggies07]

Look at this *sugar*. I swear....please sir, give me breaks on something that doesn't work so I can continue to pollute the Earth....

National Petroleum Council calls for sharp increase in carbon capture subsidies

 

[jhm]

If we get the long overdue global recession any time soon, peak demand will probably be fall 2021. Crazy.

IEA is sticking to their 2019 growth figure of 1M barrels though it almost certainly will total something like 600-850k when all is tallied, way down from the 1.6M projected as recently as May. For 2020 they have at 1.2M as a growth projections, but there's zero reason to think it'll be more than this year's growth. As @jhm has said many times, these nonsense projections are quoted as fact by gov't and really hinder proper transition planning.

Any way you slice it, I see no way real peak oil demand goes past 2024/25. Like nearly 0% chance.

Funny thing is the key indicators of recession seem to be declining auto sales and softening oil demand growth. Coincidence?

 

[Doggydogworld]

Peak ICE was 2017

The ICE fleet grows by ~50m cars each year. We won't hit peak ICE until EV sales grow 25x. Even at 50% CAGR that's 2026.

Peak ICE sales may have been 2017. Sales rates are cyclical. It's possible growing EV share will prevent a new ICE record in the next upcycle, but nobody knows.

I think Tesla will end 2020 close to 800k rate and close to 1.5 million end of 2021. Optimistic perhaps, but at 17% market share(historic avg) it implies over 4 million Ev rate next year and 7.5 in 2022...

Tesla share is much higher now since the Chinese subsidy cuts eliminated and entire segment of EV supply. Tesla is at a 400k+ rate vs. annualized global run rate of ~1.5m, over 25% share. Full year 2020 will be 500-550k Tesla out of 2.0-2.3m, close to 25%.

 

[jhm]

EV Sales: Global Top 20 October 2019

 

[Oil4AsphaultOnly]

The ICE fleet grows by ~50m cars each year. We won't hit peak ICE until EV sales grow 25x. Even at 50% CAGR that's 2026.

Peak ICE sales may have been 2017. Sales rates are cyclical. It's possible growing EV share will prevent a new ICE record in the next upcycle, but nobody knows.

Tesla share is much higher now since the Chinese subsidy cuts eliminated and entire segment of EV supply. Tesla is at a 400k+ rate vs. annualized global run rate of ~1.5m, over 25% share. Full year 2020 will be 500-550k Tesla out of 2.0-2.3m, close to 25%.

Oh I wouldn't be so unsure. If we use gasoline production as a proxy, we can see that 2018 was peak gasoline production for almost all months of the year versus all the other years: U.S. Refinery and Blender Net Production of Crude Oil and Petroleum Products (Thousand Barrels)

Looks like a pretty good proxy for claiming 2018 was peak ICE to me. Assuming supply of fuel correlates to demand of fuel.

 

[winfield100]

The ICE fleet grows by ~50m cars each year. We won't hit peak ICE until EV sales grow 25x. Even at 50% CAGR that's 2026.

Peak ICE sales may have been 2017. Sales rates are cyclical. It's possible growing EV share will prevent a new ICE record in the next upcycle, but nobody knows.

Tesla share is much higher now since the Chinese subsidy cuts eliminated and entire segment of EV supply. Tesla is at a 400k+ rate vs. annualized global run rate of ~1.5m, over 25% share. Full year 2020 will be 500-550k Tesla out of 2.0-2.3m, close to 25%.

@Doggydogworld
I invite you to drive 10’s of 1,000’s of miles and actually __observe__ the 10’s of 1,000’s of “sold” cars just sitting on dealers lots, slowly rusting, pretty faces saying “please buy me, no me, over here ME”
In my travels I see both giant lots and small lots, either unsold or waiting to be resold.
There is a _glut_ of them, and it seems to be increasing from simple observation
If you demur, then just observe the ads that say, (paraphrased)

“Please dear ghod buy me, by a truck, car, anything and you will get way over $10,000 in rebates, incentives, cash back, zero percent financing just take the damn things off our hands we are going broke”

If you “sell a vehicle” to a dealer, so it just sits, useless, unmoving, you are padding the numbers falsely

They are hurting

Tesla on the other hand, literally cannot make and sell them fast enough.

If you cannot see this sea change tsunami I don’t know what

Oh and tell Montana (I cannot) if he had invested the $118,000 in skaboooooskas fund at the end of May, it would be almost 1/4 million now

 

[jhm]

Dog makes a fair point that peak new ICE sales comes before peak ICE fleet. The question is how these two peaks relate to peak oil. Given that generally the new mix of vehicles are more energy efficient than the old ones being replaced we should see peak motor fuel happen before the ICE fleet starts to decline. Gasoline sales in both the UE and Europe have roughly plateaued over the last decade or so. I believe most of this was due to improved fuel efficiency. So it does not take much scale of EV sales to actually push these regions into declining oil demand.

Developing countries are another matter. The fully developed world does tend to export used vehicles to developing countries. So we can expect to see a lag in the entry of higher fuel efficiency and electric vehicles there. But this trade in used vehicles does mean that fuel demand in the US and Europe may follow the new vehicle sales more closely than the global fleet.

Europe has some substantial efficiency goals to hit soon. So I would look to Europe to be a leading indicator of how new vehicle demand maps to fuel demand.

 

[jhm]

I don't know if this is still the case, but awhile back I read that Mexico imports more used vehicles from the US and Canada than it buys as new vehicles. My friends from Congo tell me that any car with fewer than 70k miles on it would be thought of as a "new" car in the DR Congo. Congo has about 24 motor vehicles per 1000 inhabitants. Mexico has about 12 times as many vehicles, 294 per 1000 inhabitants. And for comparison the US has 821 vehicles per 1000 inhabitants.

Roughly speaking you can gauge how developed a country is by its motorization rate. Regions with low motorization will tend to import used vehicles from regions with higher motorization. It makes sense that in areas where the per capital daily income is lower, new vehicles are simply beyond reach. In Congo having in any private car, even one with 200k miles on it puts one into the elite top 1% of the country.

I raise this perspective because I want to ask this question. What happens to global trade in used vehicles when EVs create an Osborn effect for ICE vehicles? We are seeing new vehicle sales decline or level out in NA, EU and China. Naturally most new car buyers can hold onto their existing cars a few years longer as they wait for better EVs to come to market. This suggests that places like the US and Europe will hold onto more of their used fleet in the short run. This very well could reduce the number of used vehicles available for export to places like Mexico and DR Congo. In a place like Mexico, perhaps the new car market makes up the used car import shortfall while in places like Congo people just go without as over 99% of the population does. So an EV Osborne effect could have the impact of reducing trade in used vehicles and slowing the growth of vehicle fleets in countries that import used vehicles. So we could see global fleet growth slow down until EV makers are able to satisfy the demand for new EVs. It could take about a decade for EV supply to resolve the Osborne effect. We could be at the beginning of a decade long slowdown in the growth of the global fleet. Thus, the Osborne effect can bring the ICE fleet to an earlier peak than one might otherwise expect.

I would also point out that this Osborne effect is not just a matter if consumer choice. China, for example, has a whole regulatory timeline that coerces the faction of EV to increase over time. For instance they want to hit 25% by 2025. So policy pressure in China will slow down new ICE sales even as the market struggles to build enough compelling EVs to achieve policy goal. Thus, the Chinese government is in effect mandating a kind of Osborne effect. The EU emissions policy will have a similar effect of slowing down ICE sales while EVs production tries to catch up.

We should probably not be assuming that the global fleet will keep growing at 3.7%/y through the next decade.