Ok, let's see if we can work through this scenario. It sounds like there are two issues that most concern you. 1) collateral damage to the economy from devastatingly low oil prices, and 2) a lack of investment in oil leading to consolation in the hands of the Saudi Arabias of the world and high long-term oil prices perhaps as high as $100/b. Let's look at both.
Collateral damage. A huge swath of the economy is actually dependent on the oil economy. Much of this is obvious, but some are more remote like rail roads which transport oil can get hurt in a down turn. Indeed rail rail roads in the US have already lost revenue to the lift in the oil export ban. It is now cheaper for East Coast refineries to import foreign oil than to ship domestic oil by rail from the Midwest. So small changes in the marketplace can have unexpected results. How do we hedge against such fall out? Indeed bankruptcy is already happening across all the fossil fuel industry. Coal is hardest hit, and Peabody, the largest US coal producer has just declared bankruptcy. The market cap for the coal sector has already lost about 95%, and energy bonds are largely in junk bond status. After coal, natural gas is hard hit. I've heard reports that about half of public oil and gas companies are bankruptcy or at serious risk right now. The point is that this fall out is already happening. It is largely priced into the market. So one can hedge against further decline by shorting the oil and gas sector. I did not find a strong correlation here with Tesla, but it does stand to reason that as oil players sink into bankruptcy, market caps will fall to zero. So this can give you some protection against very deep fallout. However, I do think that shorting the whole stock market is too blunt an instrument for the specific risk of an oil collapse. Shorting the price of oil remains attractive to me, because virtually all the damage done is revenue driven, and the revenue to all players, even remote ones like rail roads and banks, are a function of the price of oil. For example, if you are a bank sitting on destressed loans to oil and gas companies, you definitely want to hedge the price of oil. The value of your loans and whatever physical collateral that may back them up increases with the price of oil. Think of it this way, suppose you lend money secured to certain oil wells. In default, you essentially own the output of the oil wells or the actual wells. Thus the value of your bad loans is based on the future price of oil and how much these wells produce. Banks holding such assets will probably want to hedge them with futures or sell them, but even selling the assets amounts to selling an oil revenue stream. So the value all comes down to the price of oil and the futures curve. In a liquidation scenario, the value of an oil company gets stripped down to the value of oil assets producing an oil revenue stream. So it is all about the price of oil.
Now as oil players go bankrupt, their assets will get sold to other oil players. The investors will buy oil assets at a fraction of the cost it would take to develop them new. Thus, the market will consolidate into the hand of investors with stronger balance sheets. Petrobras wants to sell off about $14B. Who will buy and at what price? While it is cheaper to buy distressed assets for pennies on the dollar that is what strong players will do. So I'm not so worried about the world losing the oil from these assets or even the ability of these string hands to finance new supply when the economics call for that. So what if the consolidation is so tight that oil rebounds to $100/b. I think we are looking at 2019 or later given the enormous inventory that must be liquidated before the price gets that high. How do we hedge against a return of high oil prices that damages global demand? Well, I think Tesla itself is the leading hedge. Just imagine how well the Model 3 will sell if in 2020ish oil is near $100 and gasoline sells around $4/gal. But it is not simply EV sales that will be compelling. I figure that each kWh of Tesla batteries can displace about 6 barrels of oil over the batteries useful life. So the Gigafactory at 50 GWh / year is displacing some 300 million barrels of displacement per year or around 822,000 bpd. This is an enormous supply of oil alternatives from one plant comparable to about 9% of US oil production. It is simply cheaper to build new Gigafactories than to explore and produce new oil. Thus, gigafactories become the product that Tesla can sell to energy investors or build out and use to compete directly with what oil oligopoly may hold the oil assets. Simply put gigafactories will undercut oil and the price of oil will either be competitive (under around $25/b) or oil will lose market share rapidly. Oil at $100/b would easily attract $250B in investments into gigafactories, which is about all that is needed for batteries to drive oil out of the energy markets altogether. So as a Tesla investors, I have absolutely no fear of oil going to $100 and I would drop the oil hedge along the way once this became clear.
I hope this helps.
