Shorting Oil, Hedging Tesla

[jhm]

China's Top Refiner Sees Oil Product Demand Peak By 2025 | OilPrice.com

"China's oil products will enter a final growth phase before peaking in the next five years," the Economics and Development Research Institute (EDRI) at Sinopec said, as carried by Argus.

According to the research institute, gasoline demand in China will likely peak in 2025, while demand for diesel could peak as soon as next year.

Longtime thread participants will recall that a few years ago I was pretty obsessed with the idea that diesel could peak around 2021 and gasoline demand around 2025. It turns out that Sinopec's think-tank Argus has reacted this conclusion specifically about China's domestic market. Given that most of the global demand growth for oil has been in China, this suggests that global peaks will happen near the same time.

China is still building out more refining capacity. The industry seems to think there will be more export demand to chase, but this is pretty dicey prospect. A surplus of refinery capacity will be competing for the last barrels of export demand.

Peak oil demand is within sight.

 

[mspohr]

World’s Largest Oil Traders Caught In Global Corruption Scandal | OilPrice.com

 

[mspohr]

Shell says assets could be worth $22bn less as Covid hits oil demand

 

[bruce4000]

China's Top Refiner Sees Oil Product Demand Peak By 2025 | OilPrice.com

These posts show that fossil industry is a bad place to invest (besides environment considerations). Given that refineries and power plants have 30 to 40 year lifespans, even if we may or may not be at peak fossil, new capacity surely will have to be written off.

Longtime thread participants will recall that a few years ago I was pretty obsessed with the idea that diesel could peak around 2021 and gasoline demand around 2025. It turns out that Sinopec's think-tank Argus has reacted this conclusion specifically about China's domestic market. Given that most of the global demand growth for oil has been in China, this suggests that global peaks will happen near the same time.

China is still building out more refining capacity. The industry seems to think there will be more export demand to chase, but this is pretty dicey prospect. A surplus of refinery capacity will be competing for the last barrels of export demand.

Peak oil demand is within sight.

 

[jhm]

World’s Largest Oil Traders Caught In Global Corruption Scandal | OilPrice.com

 

[jhm]

The Very Real Possibility Of Peak Oil Supply | OilPrice.com

It's no surprise that the oil industry would trot out the peak oil supply theory again to counteract the peak oil demand narrative, especially in the face of massive oil asset write-downs.

But in reality the decline of oil has always been about both peak demand and peak supply. They are two sides of the same coin. To see why consider three questions:

A) What price of oil is high enough to sustain thw expansion of oil production over the long run?

B) What price of oil is low enough to sustain the expansion of oil consumption over the long run?

C) What happens when no range of prices is able to satisfy both A and B?

Peak oil supply theory recognizes that oil extraction becomes increasingly expensive over time. The share revolution may have thrown a wrinkle in this, but even shale has its geologic limits. So the answer to A is an increasing price, but already north of $40/b.

Conversely peak oil demand theory recognizes that alternatives to oil such as renewable energy, video conferencing and EVs become cheaper and more compelling over time. Indeed, the core tech to link renewable energy and transport fuels, the battery, continues to decline about 20% each year. To remain price competitive, motor fuel prices will need to come down quickly as well. Given the fixed costs of refining and distributing motor fuel, a low enough cost of battery can drive motor fuel demand for crude below $0/b. That is, non-motor fuel products will need to bear the full cost of crude and cross-subsidize motor fuels.

So the answer to question C is that ultimately oil producers will need a higher price for crude that what will sustain growth in consumption. The spot price can vary from supply destroy lows to demand destroying highs, but eventually no price sustains both. Past this point both production and consumption enter decline.

There is little point in quibbling whether it's peak supply or peak demand. It’s both. Eventually there is no feasible price that enables oil to grow.

 

[jhm]

Will Batteries Kill Off Traditional Power Plants? | OilPrice.com

It's refreshing to read oil analysts make respectful reference to "Big Battery."

In other words, Big Battery is beginning to rival Big Oil for dominance in our power grids, partly thanks to quirks in our power usage patterns.

 

[jhm]

The Energy Sector To Watch In 2021 | OilPrice.com

OMG, oilprice.com article says bright spot in the energy sector is EV charging networks and a gas station chain with convenience food. Wow, oil is looking like the greasy rotating hot dogs that have to be tossed out at the end of the week.

 

[jhm]

I'm really looking forward to Tesla ramping up Semi production this year. This will make a real dint in oil demand expectations. It will prove that EV tech is unstoppable. So many energy bobbleheads have assumed that EV tech can't touch hauling. I want them to be proven wrong by a growing fleet of Semis that that save top logistics firms tons of money. No contest. Batteries beat barrels hands down.

 

[ammulder]

A Monster Wind Turbine Is Upending an Industry
https://www.nytimes.com/2021/01/01/business/GE-wind-turbine.html
Interesting background on next-gen wind turbines, each one of which can power 12,000 (!!) homes. Also this note:

The big-ticket projects costing billions of dollars that are possible at sea are attracting large investors, including oil companies like BP and Royal Dutch Shell, that want to quickly enhance their green energy offerings. Capital investment in offshore wind has more than tripled over the last decade to $26 billion.​

 

[jhm]

A Monster Wind Turbine Is Upending an Industry
Interesting background on next-gen wind turbines, each one of which can power 12,000 (!!) homes. Also this note:

The big-ticket projects costing billions of dollars that are possible at sea are attracting large investors, including oil companies like BP and Royal Dutch Shell, that want to quickly enhance their green energy offerings. Capital investment in offshore wind has more than tripled over the last decade to $26 billion.​

13MW is one beast of a wind turbine!

 

[ItsNotAboutTheMoney]

A Monster Wind Turbine Is Upending an Industry
https://www.nytimes.com/2021/01/01/business/GE-wind-turbine.html
Interesting background on next-gen wind turbines, each one of which can power 12,000 (!!) homes. Also this note:

The big-ticket projects costing billions of dollars that are possible at sea are attracting large investors, including oil companies like BP and Royal Dutch Shell, that want to quickly enhance their green energy offerings. Capital investment in offshore wind has more than tripled over the last decade to $26 billion.​

This is an example of how people get taken by surprise by technological developments years after people who follow developments in an industry have waiting impatiently for the developments to hit the market.

First reference I can find to the Haliade X in a post on this forum was March 2018.
It was announced at the time as planned to be 12.5MW, although the article you linked says 13MW.

 

[ammulder]

This is an example of how people get taken by surprise by technological developments years after people who follow developments in an industry have waiting impatiently for the developments to hit the market.

Yeah, the last I recall hearing about it was when they were shipping the blades for the demo unit -- needless to say it was not up and running. It looks from the pics like it's now going. And with a full order book, I guess GE has the same challenge as Tesla -- scaling up manufacturing in a timely fashion.

 

[mspohr]

This is an example of how people get taken by surprise by technological developments years after people who follow developments in an industry have waiting impatiently for the developments to hit the market.

First reference I can find to the Haliade X in a post on this forum was March 2018.
It was announced at the time as planned to be 12.5MW, although the article you linked says 13MW.

GE had their heads in the sand for years and suffered from their focus on NG turbines. Looks like they are trying to make up for lost time.

 

[jhm]

It’s time to start wasting solar energy

Nice article on oversizing solar. We've pretty much have discussed all this.

 

[ammulder]

It’s time to start wasting solar energy

Nice article on oversizing solar. We've pretty much have discussed all this.

I know that’s about utility solar, but it makes me think... I would love a solar roof, and I wonder... would it be worth maxing out the percentage of energy generating tiles to sell back to the grid on peak days? To charge multiple EVs in the future? To maximize the change of powering the house through the winter?

 

[ItsNotAboutTheMoney]

It’s time to start wasting solar energy

Nice article on oversizing solar. We've pretty much have discussed all this.

i disagree about the concluding statement in one key way: reducing the cost of high-efficiency panels is still extremely important for less sunny locations.

 

[Dave EV]

i disagree about the concluding statement in one key way: reducing the cost of high-efficiency panels is still extremely important for less sunny locations.

Indeed. Interestingly, improving efficiency is also one significant way to reduce cost. Eventually solar panels will start to approach the cost of the raw materials. At that point, the most efficient panel will be cheaper.

 

[jhm]

I know that’s about utility solar, but it makes me think... I would love a solar roof, and I wonder... would it be worth maxing out the percentage of energy generating tiles to sell back to the grid on peak days? To charge multiple EVs in the future? To maximize the change of powering the house through the winter?

That could pencil out. I can't remember the cost difference between shingles with and without the solar cells. If the price differential is small and you save money on less inverter capacity too, the added value at sunrise/sunset and throughout the year could be well worth it. A lot of roofs have west and east facing portions, which can be useful for evening and early morning power. The surplus power can also charge up your battery.

 

[jhm]

Indeed. Interestingly, improving efficiency is also one significant way to reduce cost. Eventually solar panels will start to approach the cost of the raw materials. At that point, the most efficient panel will be cheaper.

Increasing panel efficiency also reduces labor per Watt, mounting hardware per Watt and land cost cost per Watt. It's worthwhile so long as the module per Watt does not go up so much as to cancel out the other savings.