Shorting Oil, Hedging Tesla

[jhm]

In Supply-and-Demand 101, normally when supply is high and demand is low, prices drop, right? However, what happens when we hit a tipping point where there are enough EVs to bring a noticeable reduction in demand for gasoline? Do gas stations raise their prices in order to make up for the lost selling volume, even though the supply is high and the demand is dwindling? If they do that, it will be yet another pressure point on the cost of gasoline. If that doesn't work, then gas stations will start closing and gas cars will start to have more and more range anxiety, but it will be much worse than EVs because you can't fill-up at home. Chalk this scenario up as one more nail in ICE's coffin.

Gas stations make there money on the entire fleet of new and old ICE vehicles. I think this knock-on effect will happen, but it will be more of an issue for late EV adopters, the car buyers most loyal to ICE. We're just now getting into the early mass market. I think gas station shrinkage will be more an issue around 2028 and beyond. Station operators are presently evolving their business model more around convenience retail. They can certainly try to get in on the charging market, but the disruption potential is high. Any retailer with a parking lot can compete with them. Eventually, though, offering fueling pumps to an aging fleet of old ICE vehicles won't be a desirable amenity to attract retail customers. So yeah, this will force those who are most resistant to EVs to finally buy their first one or use other mobility services (e.g. robotaxis).

 

[mspohr]

I think gas stations have been closing at a high rate for the past 10 years. This is a long term accelerating trend.

Gas stations will disappear sooner than you think

Gas Stations Could Soon Be As Quaint As Bookstores and Soda Fountains

 

[mspohr]

Morgan Stanley: Gasoline Industry Is About to Become Totally Worthless | OilPrice.com

Morgan Stanley has argued that traditional ICE makers are destined to become money-losers as early as 2030.

MS' analyst Adam Jonas says the market may be ascribing zero or even negative value for ICE-derived revenues at GM and Ford and has listed a variety of factors that are likely to transform the companies' once-profitable assets into potentially cash-burning and loss-making businesses.

 

[jhm]

I think gas stations have been closing at a high rate for the past 10 years. This is a long term accelerating trend.

Gas stations will disappear sooner than you think

Gas Stations Could Soon Be As Quaint As Bookstores and Soda Fountains

I'm looking forward to when big box stores figure out that EV charging can induce shoppers to spend a half hour or more just shopping.

 

[jhm]

WoodMac: Global Green Car Sales To Overtake Gas Vehicles Until 2047 | OilPrice.com

WoodMac is publishing BS "analysis."

So WoodMac is assuming that BEV sales will only grow an average of 12% per year for the next 20 years (2.14M in 2020 to 62M in 2050). What is this based on? BEVs grew 31% last year, which was a lousy year for auto sales generally. Meanwhile the cost of BEV batteries keeps falling 20% each year, which means we are only a few years away from BEVs having lower sticker prices than comparable ICE vehicles. It's hard to imagine why BEV sales growth should slow to 12% when they are cheaper, cleaner and a lot more fun than dad's old gasmobile.

How we suppose BEVs just continue to grow at about 30% for the next few years? This gets to 65M BEVs sold as early as 2033. That's 17 years sooner to 62M than WoodMac is imagining. The point is WoodMac is painting a wildly optimistic future for legacy ICE technology and the industries that supply it. Historical growth rates simply do not support such slow growth rates as a mere 12%/y.

 

[mspohr]

WoodMac: Global Green Car Sales To Overtake Gas Vehicles Until 2047 | OilPrice.com

WoodMac is publishing BS "analysis."

So WoodMac is assuming that BEV sales will only grow an average of 12% per year for the next 20 years (2.14M in 2020 to 62M in 2050). What is this based on? BEVs grew 31% last year, which was a lousy year for auto sales generally. Meanwhile the cost of BEV batteries keeps falling 20% each year, which means we are only a few years away from BEVs having lower sticker prices than comparable ICE vehicles. It's hard to imagine why BEV sales growth should slow to 12% when they are cheaper, cleaner and a lot more fun than dad's old gasmobile.

How we suppose BEVs just continue to grow at about 30% for the next few years? This gets to 65M BEVs sold as early as 2033. That's 17 years sooner to 62M than WoodMac is imagining. The point is WoodMac is painting a wildly optimistic future for legacy ICE technology and the industries that supply it. Historical growth rates simply do not support such slow growth rates as a mere 12%/y.

BEVs are just starting to hit the steep part of the adoption curve so we can expect increasing rates of adoption.
The WoodMac people are clueless.

 

[ggies07]

WoodMac: Global Green Car Sales To Overtake Gas Vehicles Until 2047 | OilPrice.com

WoodMac is publishing BS "analysis."

So WoodMac is assuming that BEV sales will only grow an average of 12% per year for the next 20 years (2.14M in 2020 to 62M in 2050). What is this based on? BEVs grew 31% last year, which was a lousy year for auto sales generally. Meanwhile the cost of BEV batteries keeps falling 20% each year, which means we are only a few years away from BEVs having lower sticker prices than comparable ICE vehicles. It's hard to imagine why BEV sales growth should slow to 12% when they are cheaper, cleaner and a lot more fun than dad's old gasmobile.

How we suppose BEVs just continue to grow at about 30% for the next few years? This gets to 65M BEVs sold as early as 2033. That's 17 years sooner to 62M than WoodMac is imagining. The point is WoodMac is painting a wildly optimistic future for legacy ICE technology and the industries that supply it. Historical growth rates simply do not support such slow growth rates as a mere 12%/y.

How about because of this? We both saw that after being sold GTM has gone down hill.

Greentech Media news group to be closed by oil, gas, energy research firm Wood Mackenzie - Energy Transition Now

 

[mspohr]

How about because of this? We both saw that after being sold GTM has gone down hill.

Greentech Media news group to be closed by oil, gas, energy research firm Wood Mackenzie - Energy Transition Now

This is advanced denial. It proves they are irrelevant.

 

[SmartElectric]

Do gas stations raise their prices in order to make up for the lost selling volume, even though the supply is high and the demand is dwindling?

Don't despair, they have a secondary revenue source:

 

[ItsNotAboutTheMoney]

Don't despair, they have a secondary revenue source:

At my local gas station, I see more vehicles parked at the convenience store than the pump.

Also we have an abundance of gas stations. Not going to be a problem for a long time.

 

[mspohr]

At my local gas station, I see more vehicles parked at the convenience store than the pump.

Also we have an abundance of gas stations. Not going to be a problem for a long time.

Had to get gas for my old Land Rover today. Stopped at a gas station which also had car wash, mini-mart, Port of Subs and a casino. I think they have it covered.

 

[jhm]

U.S. Oil Majors Downgraded by S&P on Climate Risk, Earnings | Financial Post

Big Oil gets a credit downgrade.

 

[winfield100]

I'm looking forward to when big box stores figure out that EV charging can induce shoppers to spend a half hour or more just shopping.

historical note:
i seem to recall some Costco/Priceclub (old name) stores in California, USA had inductive chargers at some stores
you plugged in a paddle into a slot in the EV and it inductively charged.
these were the PbA (lead acid) type batteries
that went away but it was around 15-25 years ago.
perhaps members of Big box stores could put in suggestions boxes to add J1772 chargers.
The washington DC store has a sea of cars and lines at gas pumps (good liquor prices)
it might be a logistical nightmare with little ROI tho.

 

[mspohr]

historical note:
i seem to recall some Costco/Priceclub (old name) stores in California, USA had inductive chargers at some stores
you plugged in a paddle into a slot in the EV and it inductively charged.
these were the PbA (lead acid) type batteries
that went away but it was around 15-25 years ago.
perhaps members of Big box stores could put in suggestions boxes to add J1772 chargers.
The washington DC store has a sea of cars and lines at gas pumps (good liquor prices)
it might be a logistical nightmare with little ROI tho.

Our local SaveMart and Raleys supermarkets have CCS/Chademo 50 kW chargers.

 

[jhm]

Boring Car Stocks Have Suddenly Become Wall Street Favorites | OilPrice.com

Author takes cheap a shot about YTD stock prices, but there is some interesting content here. There is stronger agreement that EVs are the future for any automaker. The author believes that investors are responding favorably to this change in posture. I'm not so sure the recent price gains for Ford and GM are not just a matter of anticipated recovery from Covid-19 suppressed auto sales. When the economy becomes mobile again, people will want new cars of any sort. But if it helps oil and gas investors to think that investors are rewarding the green signaling of Ford and GM, I won't stand in the way.

It is also an opportunity for oil producers to understand their own fate. When GM says it will end ICE production by 2035, this does have some accounting implications. Along with the oil industry, ICE makers are faced with the risk of stranded assets. The depreciation schedules for any assets that have sole use for ICE vehicles may need to be adjusted for this 2035 date, and some assets may need to be impaired. Thus, there is some accounting teeth to this. These targets will impact income and balance sheets, along with impacting future capital decisions. This will put pressure on GAAP profitability metrics. ICE vehicles could become more costly to make, given that long lived manufacturing assets will need to depreciate faster.

 

[adiggs]

And finally the oil producers? At $100/b, they too will get hyped up on overproduction even as the ground of demand erodes beneath their feet. But they won't care because $100/b creates a fever of production at any cost. The industry will over invest in overpriced assets, just in time for the demand peak to give way to terminal decline.

So why should I worry? $100/b? Sure, this ought to be fun.

Heck - if we get that sort of extreme over pricing (my estimation), that'll lead to some really high share prices for Chevron (my guess), and THAT sounds like a really good long duration short (via purchase of puts). H'mm....

 

[mspohr]

Our local SaveMart and Raleys supermarkets have CCS/Chademo 50 kW chargers.

EVgo Further Extends Nation's Largest Fast Charging Network to Tesla Drivers

LOS ANGELES, Feb. 11, 2021 /PRNewswire/ -- EVgo, the nation's largest public fast charging network for electric vehicles (EVs), is expanding its offering for Tesla drivers to charge at more EVgo stations across the country, upgrading hundreds of its stations with integrated Tesla connectors. This will further EVgo's reach as the only EV charging platform that is both 100% renewable electricity powered and capable of charging all three fast charging standards (CHAdeMO, SAE Combo or CCS, and Tesla) without the need of a separate adaptor. This, combined with EVgo's industry leading uptime of 98%, will further extend the benefits of EVs to more U.S. drivers and reduce greenhouse gas emissions from the transportation sector.

 

[mspohr]

Elon Musk says the Biden administration shot down his carbon tax pitch

Elon Musk says he pitched the Biden administration on instituting a carbon tax as a way to encourage a faster shift to renewable energy, but he was told the idea was essentially “too politically difficult.”

“My top recommendation honestly would be just to have a carbon tax,” Musk said. “Because we’re not paying for the CO2 capacity of the oceans and atmosphere, we have what in economics is called an unpriced externality. The market is unable to respond to an unpriced externality. If we just put a price on it, the market will react in a sensible way.”

 

[jhm]

Latest musings on hydrogen...

The existing hydrogen market is about 70 million tonnes per year. I've heard conflicting reports on how much electrolyzers currently supply, anywhere from 1% to 4%. No matter, let's size up 70 Mtpa as if we could wave a magic wand in 2019 to have sufficient RE and electrolyzer capacity to satisfy this quantity demanded.

First, note that in 2019, global power generation reached 27,005 TWh of which 2806 TWh was from non-hydro renewable energy (mostly wind and solar). Put another way average total generation was 3.08 TW and average renewable generation was 0.32 TW. Average solar capacity factor is about 25%, while average wind is around 40%. The wind fleet produces about twice as much energy as the solar fleet so this implies an average capacity factor of 33.3%. That is the RE fleet has an effective AC capacity of 0.96 TWac.

Next, let's electrolyze and compress 70 Mt of H2 at about 70% efficiency. This calls for 3,360 TWh = 70 Mt * 33.6 MWh/t / 70% of incremental power generation. This is an increase of 12.5% of total power generation, but since we want this to be sourced from RE, this is actually a 120% increase in renewable power generation, or an incremental 1.15 TWac of RE power.

Finally, to be sure that the electrolyzers run mostly on RE and surplus other generation, we need to run the electrolyzers only about 30% to 50% of the time. If we had 1TW of electrolyzers, they could operate to at about 38.4% of capacity to produce 70 Mt/y.

So if I could wave a magic wand, I'd summon 1.15 TWac of RE power and 1 TWac of electrolyzer capacity to satisfy the existing 70 Mtpa market hydrogen.

This would not directly remove any fossil power generation from the grid, but it does mean that there is enough electrolyzer capacity to absorb all the incremental RE power. Indirectly, this would mean that even more RE can be added to the grid with much smaller cost of integration. Seasonal storage would be much more manageable. For example, right now Texas ERCOT is being stress by the arctic freeze. Wholesale power prices have been surging to $9000/MWh. Planners were only counting on 6GW of wind generation, but are fortunately getting 9GW. And this is with about half the fleet iced over. Imagine this scenario if Texas had over twice as much wind power and 12 GW of electrolyzers. So in this scenario during this storm, wind would be delivering about 18GW. So the response to the storm largely becomes a question of how much electrolyzer load to shed. Net of electrolyzers, wind could deliver 6GW to 18GW per dispatch. Shedding electrolyzer load is amazingly cheep compared to paying $1000 to $10,000 per MWh in the current situation. These high prices during seasonal peaks are how the ERCOT market puts a price on spare capacity. As substantial fleet of electrolyzers in Texas would enable much more wind, solar and battery resources to be available at such extreme moments in the year.

 

[TheTalkingMule]

Bottom is falling out.....

Analysis: Saudi Arabia eyes Dubai's crown with HQ ultimatum

From 2024, the Saudi government will stop giving state contracts to companies and commercial institutions that base their Middle East hubs in any other country in the region, the Saudi finance minister told Reuters.

The measure is the latest attempt by the kingdom, a religiously conservative nation that is the birthplace of Islam, to remould itself as a financial and tourism hub under the leadership of de facto ruler Crown Prince Mohammed bin Salman.

But challenging the dominance of Dubai, in neighbouring United Arab Emirates (UAE), as the region’s commercial and financial capital will not be easy.

Gonna take a while to clean up after these clowns.....

150 years of spills: Philadelphia refinery cleanup highlights toxic legacy of fossil fuels

PHILADELPHIA (Reuters) - Wearing blue hard hats, white hazmat suits and respirator masks, workers carted away bags of debris on a recent morning from a sprawling and now-defunct oil refinery once operated by Philadelphia Energy Solutions (PES).

Other laborers ripped asbestos from the guts of an old boiler house, part of a massive demolition and redevelopment of the plant, which closed in 2019 after a series of explosions at the facility.

Plans call for the nearly 1,400-acre site to be transformed into a new commercial hub with warehousing and offices. All it will take is a decade, hundreds of millions of dollars, and confronting 150 years’ worth of industrial pollution, including buried rail cars and a poisonous stew of waste fuels poured onto the ground. A U.S. refinery cleanup of this size and scope has no known precedent, remediation experts said.

It’s a glimpse of what lies ahead if the United States hopes to wean itself off fossil fuels and clean up the toxic legacy of oil, gas and coal.