Shorting Oil, Hedging Tesla

[TheTalkingMule]

It the price of oil remains low, totalitarian oil regimes will fall and the supply will sure as hell be disrupted. I think we're gonna be flat/down for about 18 months, then the bottom falls out and we see mass chaos for a minute.

 

[jhm]

The Secret Behind America’s Most Valuable Energy Play | OilPrice.com

Chevron and Exxon investors scratch their heads, "How come our stonk don't go up 26% like NextEra Energy?"

 

[jhm]

Democrats Want Permanent Ban On Offshore Oil Leasing | OilPrice.com

The irony of Dems banning offshore leasing for oil and gas is that it could help avoid oversupply and unprofitably low prices for producers.

Dems do need to disentangle offshore wind from current offshore bans. We do need that to fight climate change.

But as I posted recently, we are now at a point where any new oil fields risk blowing past a 1.5C future. So we need to draw the line: no new oil fields.

FWIW, it is perfectly within the scope of a free market for governments to disallow drilling on public lands. Indeed, leases on public lands typically under leases on private lands, which economically puts the government in the position of undercutting competition and subsidizing oil and gas production. So underpriced leases on public lands should be an anathema to any one who claims to support free market principles.

 

[TheTalkingMule]

Energy leases on public lands could just include the costs of all externalities. I have no problem with the free market paying essentially nothing for offshore wind leases and some massive fee for offshore drilling.

If that logical setup we're in place, who in their right mind would drill? Drive towards open markets, covering taxpayers for externalities, and ending all subsidies(fossil first!).

 

[jhm]

Energy leases on public lands could just include the costs of all externalities. I have no problem with the free market paying essentially nothing for offshore wind leases and some massive fee for offshore drilling.

If that logical setup we're in place, who in their right mind would drill? Drive towards open markets, covering taxpayers for externalities, and ending all subsidies(fossil first!).

Agree. Public land should be used for the public good. I'd be happy to have a carbon tax apply to all fossil fuels extracted from public lands. Don't like the tax? Drill somewhere else.

 

[adiggs]

The Secret Behind America’s Most Valuable Energy Play | OilPrice.com

Chevron and Exxon investors scratch their heads, "How come our stonk don't go up 26% like NextEra Energy?"

Wow - some of the quotes in there, and their sources, should be hitting Exxon and Chevron with a clue stick in a big way. Somehow, with a muli-hundred billion investment strategy in oil vs. a multi-hundred million investment strategy in green tech, it seems these two are still at least 3 orders of magnitude off in their commitment (or is that 6 orders of magnitude- 3 for clean tech, plus 3 more for oil? h'mm)

Either way, clearly haven't yet found the right ballpark.

 

[jhm]

Wow - some of the quotes in there, and their sources, should be hitting Exxon and Chevron with a clue stick in a big way. Somehow, with a muli-hundred billion investment strategy in oil vs. a multi-hundred million investment strategy in green tech, it seems these two are still at least 3 orders of magnitude off in their commitment (or is that 6 orders of magnitude- 3 for clean tech, plus 3 more for oil? h'mm)

Either way, clearly haven't yet found the right ballpark.

Increasingly, investing in oil and gas just looks dumb.

 

[jhm]

Many Lost U.S. Oil Jobs May Never Return | OilPrice.com

Follow the jobs. Oil & gas --> Renewables

 

[ggies07]

Man, how do you talk to someone who just won't accept what's happening? When they say nuclear is just about to happen, when for 10 years they keep saying EVs pollute because of the grid (when the grid has gotten cleaner each year and continues to do so), when I try and say politely 'can I show you some stats that might change your mind?' and they say no because they can give me x amount of articles that shows the opposite.

I'm not trying to prove this person wrong, just want to educate them on the world that is changing around them.....

It's a touchy subject with this person and so after that brief talk I just let it go....feel sorry for them though.....holding onto some weird opinion/idea while the world is changing right in front of them.....

 

[gavine]

Man, how do you talk to someone who just won't accept what's happening? When they say nuclear is just about to happen, when for 10 years they keep saying EVs pollute because of the grid (when the grid has gotten cleaner each year and continues to do so), when I try and say politely 'can I show you some stats that might change your mind?' and they say no because they can give me x amount of articles that shows the opposite.

I'm not trying to prove this person wrong, just want to educate them on the world that is changing around them.....

It's a touchy subject with this person and so after that brief talk I just let it go....feel sorry for them though.....holding onto some weird opinion/idea while the world is changing right in front of them.....

This may not apply to your situation, but I've found over the years that bringing-up environmental advantages of EVs just makes conversations go downhill. When someone asks why I bought a Tesla, I tell them it's because of the performance. Doing that guides the conversation down the performance path. If you mention pollution or climate change or gas vs. electricity, people will typically start spewing what they hear or read from naysayers and it never ends well. You know you're right, they think they are right and you can't change their mind without extreme effort. Talking about performance of a Tesla actually piques their interest.

 

[jhm]

Global fuel standards are pushing the dirtiest oil out of the market

I kinda like this variation on a carbon tax that California has. It sets a credit for energy sources with carbon intensity below a target and debt above the target.

For example, the carbon intensity of crude varies 4-fold by source. So this scheme makes higher carbon intensity fuels more expensive pricing them out of the market.

While no carbon tax is an end-all for fighting climate change, I think it can have a valuable influence to make sure that as the world reduces fossil fuel consumption, it is beneficial to cut production of the higher carbon intensity first. For example, when we reduce demand by 5%, it is best if we cut the crude that is 3 time more carbon intense than average. This would have an effect of cutting emissions 15% while only cutting production 5%.

So I'd like to see the Biden Administration consider nationalizing something like the California plan.

 

[mblakele]

Global fuel standards are pushing the dirtiest oil out of the market

I kinda like this variation on a carbon tax that California has. It sets a credit for energy sources with carbon intensity below a target and debt above the target.

For example, the carbon intensity of crude varies 4-fold by source. So this scheme makes higher carbon intensity fuels more expensive pricing them out of the market.

While no carbon tax is an end-all for fighting climate change, I think it can have a valuable influence to make sure that as the world reduces fossil fuel consumption, it is beneficial to cut production of the higher carbon intensity first. For example, when we reduce demand by 5%, it is best if we cut the crude that is 3 time more carbon intense than average. This would have an effect of cutting emissions 15% while only cutting production 5%.

So I'd like to see the Biden Administration consider nationalizing something like the California plan.

California's carbon pricing is also sanitized through spending programs, making it less regressive. Money goes to programs targeting climate change, and utility customers get semi-annual climate credits on their bills.

https://www.cpuc.ca.gov/General.aspx?id=5932

This resembles the "carbon dividends" recommended here:

Economists' Statement | Climate Leadership Council

 

[replicant]

https://twitter.com/colinmckerrache/status/1318107985860829184

Reducing emissions from rail and shipping should get easier over time as we move to more renewables and EVs. Why? Because a lot of rail and shipping energy use is spent moving coal and oil around. One of the findings from this year's New Energy Outlook.
@SebHenbest
#BNEFSummit

 

[mspohr]

CleanTechnica: World Energy Outlook From IEA Is Full Of Doublespeak.
World Energy Outlook From IEA Is Full Of Doublespeak

Fossil fuel companies continue to hang onto an in-your-face stance that the global energy demand for oil will rebound after covid-19. They are holding fast to beliefs that the climate change policy moves of governments around the world will be more methodical than meteoric, more cautious than critical. In fact, this year’s World Energy Outlook publication from the International Energy Agency has stated that it won’t be until 2040 that oil and gas production will be cut by 50% compared to current levels.

 

[adiggs]

CleanTechnica: World Energy Outlook From IEA Is Full Of Doublespeak.
World Energy Outlook From IEA Is Full Of Doublespeak

Fossil fuel companies continue to hang onto an in-your-face stance that the global energy demand for oil will rebound after covid-19. They are holding fast to beliefs that the climate change policy moves of governments around the world will be more methodical than meteoric, more cautious than critical. In fact, this year’s World Energy Outlook publication from the International Energy Agency has stated that it won’t be until 2040 that oil and gas production will be cut by 50% compared to current levels.

Looking only at the link, not anything in more detail, (and really just skimming through), I was struck by how much emphasis there is on a future net zero world along with the need for policy action to bring it about (the general claim here being that economics won't get us there on it's own).

I suspect this is also par and intentional for these forecasts; there was no discussion of the valuation of the companies providing the current mix of fossil fuel energy sources, only on the volume of these fossil fuels. For investors, this is the critical thing to keep an eye on, not the units. Units are going to be high for awhile - the valuation though will (I expect) collapse with a relatively small reduction in the units.

 

[TheTalkingMule]

Looking only at the link, not anything in more detail, (and really just skimming through), I was struck by how much emphasis there is on a future net zero world along with the need for policy action to bring it about (the general claim here being that economics won't get us there on it's own).

I suspect this is also par and intentional for these forecasts; there was no discussion of the valuation of the companies providing the current mix of fossil fuel energy sources, only on the volume of these fossil fuels. For investors, this is the critical thing to keep an eye on, not the units. Units are going to be high for awhile - the valuation though will (I expect) collapse with a relatively small reduction in the units.

If you look at the "sentiment arc" from all sides of this discussion, we're clearly at the coal equivalent of 2012/13. Major players from BP to OPEC(!) have capitulated to peak demand coming within the next ten years, and have shifted to simply begging for capital access and spinning the narrative into somehow 30 more years of relevance.

Look at today's acquisitions. Is Conoco gonna make a profit from acquiring barrels with a cost of extraction supposedly in the $30's? Hell no.

The narrative is shifting faster than each version can be printed, and if there's a blue wave.......forget about it. Oil will be done.

From an investment perspective? To me this gives us an amazing opportunity with traditional investors still willing to jump back in to fossils on a covid vaccine or stimulus or whatever. I just keep staring at Chevron. How exactly is that worth $140B when they're already wildly unprofitable and all assets are in danger of being stranded. Let the consolidation continue, then short the largest remaining entities.

 

[SmartElectric]

Global fuel standards are pushing the dirtiest oil out of the market

I kinda like this variation on a carbon tax that California has. It sets a credit for energy sources with carbon intensity below a target and debt above the target

Yeah, this quote hurts Alberta Canada :

The dirtiest oil, like the viscous stuff from Canada’s tar sands, has to be steamed out of the ground and heavily refined before being shipped off to the coast. That makes it responsible for three times more carbon emissions than a barrel of “light crude,”

 

[adiggs]

If you look at the "sentiment arc" from all sides of this discussion, we're clearly at the coal equivalent of 2012/13. Major players from BP to OPEC(!) have capitulated to peak demand coming within the next ten years, and have shifted to simply begging for capital access and spinning the narrative into somehow 30 more years of relevance.

Look at today's acquisitions. Is Conoco gonna make a profit from acquiring barrels with a cost of extraction supposedly in the $30's? Hell no.

The narrative is shifting faster than each version can be printed, and if there's a blue wave.......forget about it. Oil will be done.

From an investment perspective? To me this gives us an amazing opportunity with traditional investors still willing to jump back in to fossils on a covid vaccine or stimulus or whatever. I just keep staring at Chevron. How exactly is that worth $140B when they're already wildly unprofitable and all assets are in danger of being stranded. Let the consolidation continue, then short the largest remaining entities.

Chevron is also my best instance of having a long ways to fall, and the wrong attitude about the coming fall. I admittedly am not following very closely, but the quote from earlier this year or last year about defending the dividend as the first priority for capital struck me as "how fact can we go bankrupt"

I think there's some pretty good money to be made via shorting these companies - I just am not up to doing the research to actually decide on and take a position of my own. And though I look forward to the demise of the entities, and more importantly the units they are mining, I also don't particularly care for enjoying others misery (which I would feel like were I to own puts for a long term / this company is walking dead investment).

 

[jhm]

https://twitter.com/colinmckerrache/status/1318107985860829184?s=19

This tweet is pretty cool. The problem of powering ships with renewables gets a third smaller when you realize that fossil fuels are a third of the freight.

 

[jhm]

Chevron is also my best instance of having a long ways to fall, and the wrong attitude about the coming fall. I admittedly am not following very closely, but the quote from earlier this year or last year about defending the dividend as the first priority for capital struck me as "how fact can we go bankrupt"

I think there's some pretty good money to be made via shorting these companies - I just am not up to doing the research to actually decide on and take a position of my own. And though I look forward to the demise of the entities, and more importantly the units they are mining, I also don't particularly care for enjoying others misery (which I would feel like were I to own puts for a long term / this company is walking dead investment).

Nobody has to short these companies for them to fail. They are capable of doing that on their own.