Shorting Oil, Hedging Tesla

[jhm]

Thinking further about eBuses vs CNG buses, there is a real energy savings on natural gas.

Let's look at how much gas a CNG bus burns per mile:

31.35 cf/mile = 126.67 cf/GGE ÷ 4.04 GGE/mile

Now a typical CCNG plant burns 8 cf or natural gas to make 1 KWh. So using this a as power source for the eBus leads to:

17.2 cf/mile = 2.15 kWh/mile × 8 cf/kWh

Thus, the eBus × CCNG combo uses 45% less natural gas than CNG buses. Moreover, wind and solar can potentially generate power for less.

Consider that the global price for LNG is about $5/mmbtu or $0.005/cf, and this leads to a fuel costs of $0.04/kWh at CCNG plants. Wind and solar are in many places beating this with an all-in price of $0.04/kWh. Either way, the eBus is moving along at $0.086/mile. Then CNG bus would need CNG at $2.74/mmbtu to match this energy cost per mile. Thus, we see that as China converts to eBus it is putting price pressure on LNG to nearly half the current price. In a way this leverages renewable prices to attack LNG prices to a greater extent than seen purely in the power market.

So how big is this impact of 115,700 eBuses in China. Suppose each travel 100 miles per day. That is 3135 cf/d/bus. In aggregate, that is 363 mmcf/d that can be replaced with renewable energy or efficiency.

 

[jhm]

Not sure where to put this these days - if it would be better here or in the general thread - but for those who read this article (How Tesla Will Change The World - Wait But Why) a few years ago, I thought I would share the updated chart. Renewables and Petro went up of course, but the big difference is natural gas gained over coal.......which makes sense........

Seeing the kind of efficiency BEVs can have over putting NG directly into vehicles is causing me to question the idea that natural gas has a big opportunity in transportation. I used to think that renewables would eventually drive gas out of the electricity markets, but then it would just go into transportation and compete with oil. That may not work at all if BEVs get there sooner. If you actually get more miles per unit of natural gas by sending it first to the power company, then there is no point in building up a redundant distribution network to fuel CNG and LNG vehicles. Just leverage the power grid with BEVs instead. Sea going vessels may be an exception for quite a long time, but there is much lower hanging fruit to begin with.

So natural gas may find itself pretty much boxed into the power generation and heating markets. But renewables and batteries will squeeze it largely out of the power markets.

 

[neroden]

So natural gas may find itself pretty much boxed into the power generation and heating markets. But renewables and batteries will squeeze it largely out of the power markets.

Yep, that's about right. And chemical/plastics feedstock -- natgas is a favored chemical/plastics feedstock, unlike oil.

Natgas still has a strong market for heating, but it looks to me like, on average, heat pumps are roughly as cheap to operate if you're in an area which doesn't drop below -22 C / -8 F, and you have typical electricity costs. Heat pumps are a technology, natgas is a natural resource in the decline phase, so the price crossover point is likely to happen in more and more places. (Below roughly -22C you end up using electrical resistive heat; this number has been creeping downward but there are physical limits to lowering it.)

 

[jhm]

Tesla Model S & Nissan LEAF Clocked As World’s Best-Selling Electric Cars In 2016

Global EV sales stats are out.

 

[jhm]

Yep, that's about right. And chemical/plastics feedstock -- natgas is a favored chemical/plastics feedstock, unlike oil.

Natgas still has a strong market for heating, but it looks to me like, on average, heat pumps are roughly as cheap to operate if you're in an area which doesn't drop below -22 C / -8 F, and you have typical electricity costs. Heat pumps are a technology, natgas is a natural resource in the decline phase, so the price crossover point is likely to happen in more and more places. (Below roughly -22C you end up using electrical resistive heat; this number has been creeping downward but there are physical limits to lowering it.)

Ah, yes, I forgot about petrochemical feedstock. Is this a climate change or other environmental issue? Plastic waste is a problem. But as feedstock, is natural gas okay?

The thing that worries me most about heating is that it is needed most in Dec-Jan and this is precisely when solar production is lowest. I suspect that some sort of fuel will be needed to balance the season. Perhaps the gap however can be low enough that biofuels and fuels from surplus electricity can suffice.

I have become interested in BECCS (bioenergy with carbon capture and sequestration) for handling a small need for fuel based generation while producing negative carbon emissions. I think utilities ought to be contemplating how to set up a market for negative emissions.

 

[jhm]

Crack Spreads Tell Where The Value Lies In Downstream Stocks | OilPrice.com

So what is going on with this surplus of diesel in China? Last year China exported 900 kbpd of diesel, and now it is up another 30%. Perhaps demand for gasoline is rising faster than for diesel. Or renewables and heavy electric and NG vehicles are undermining demand for diesel. I'm really not sure what is causing this imbalance between gasoline and diesel.

Whatever the story, we may want to watch this imbalance as an example of how refiners adapt. Maybe gasoline becomes relatively more expensive and EVs get a boost.

 

[dc_h]

Crack Spreads Tell Where The Value Lies In Downstream Stocks | OilPrice.com

So what is going on with this surplus of diesel in China? Last year China exported 900 kbpd of diesel, and now it is up another 30%. Perhaps demand for gasoline is rising faster than for diesel. Or renewables and heavy electric and NG vehicles are undermining demand for diesel. I'm really not sure what is causing this imbalance between gasoline and diesel.

Whatever the story, we may want to watch this imbalance as an example of how refiners adapt. Maybe gasoline becomes relatively more expensive and EVs get a boost.

How big an impact are the 115,000 electric buses they built having on diesel demand? I'm sure some of those are exported, but this has to be having a huge impact. Looking at your calculations above, you focused on Nat gas replacement, but I would guess diesel buses would be replaced first, and then NG buses.

 

[renim]

Crack Spreads Tell Where The Value Lies In Downstream Stocks | OilPrice.com

So what is going on with this surplus of diesel in China? .....

probably a lot of similar factors, but the 3 that comes to mind

No.1 Upsizing of diesel trucks, from the old soviet style lorries to modern Daimler style 18 wheelers, resulting is far greater efficiency per kg pay load. key motivation is to handle rising labour costs, more goods travelled per diver.

No.2 Substitution of municipal diesel vehicles with electric vehicles (ie buses and sanitation vehicles are replaced with EV versions)

No.3 unknown, but perhaps Chinese rail network is affecting trucking just like it is affecting air travel.

No.4 Chinese petroleum demand is still rising, faster than diesel demand. Refinery growth is still required due to petroleum, leading to excess diesel production.

 

[jhm]

How big an impact are the 115,000 electric buses they built having on diesel demand? I'm sure some of those are exported, but this has to be having a huge impact. Looking at your calculations above, you focused on Nat gas replacement, but I would guess diesel buses would be replaced first, and then NG buses.

Yeah, I tried that out and came up with just 61 kbpd. So that explains just a fraction of the 270 kbpd increase in exports since last year. It would be nice to some figures on total electrification of heavy vehicles not just buses.

 

[jhm]

According to EIA annual data, consumption of both motor gasoline and distillate fuel oil (mostly diesel) are down sharply in 2016. In fact, they are reaching 16- and 18-year lows respectively. Gasoline is at 8,537 kbpd, down from 9,178 kbpd in 2015, an annual decline of 641 kbpd. Also distillates are at 3,536 kpbd, down from 3,995 kbpd the year before, a decline of 459 kbpd. This is a pretty amazing fall off in consumption considering that fuel prices were very low in 2016. Now displacement from 159,139 EVs registered in the US in 2016 can only take credit for displacing about 8 kbpd of demand. So the fall off in demand is being driven by much more than just EVs. Overall fuel efficiency looks to be causing a long-term secular decline since 2007. The uptick in 2015 may well just be a fluke to a broader trend of decline.

(U.S. Product Supplied for Crude Oil and Petroleum Products)

 

[TheTalkingMule]

So the downward trend is fairly clear from the 2008 downturn through the recovery and dawn of the renewables takeover? If these numbers are accurate then 2015 simply looks like desperate refining of a massive glut that likely still exists.

Is the a single source for a vaguely accurate estimation of global crude storage? I assume there's no real way to tell how much SA and Russia have in tankers or elsewhere.

 

[jhm]

So the downward trend is fairly clear from the 2008 downturn through the recovery and dawn of the renewables takeover? If these numbers are accurate then 2015 simply looks like desperate refining of a massive glut that likely still exists.

Is the a single source for a vaguely accurate estimation of global crude storage? I assume there's no real way to tell how much SA and Russia have in tankers or elsewhere.

This is "products supplied" and it is a measure of consumption, not production. Specifically, over production that is just sitting in storage (stock) is not counted as "supplied".

From EIA, "Approximately represents consumption of petroleum products because it measures the disappearance of these products from primary sources, i.e., refineries, natural gas processing plants, blending plants, pipelines, and bulk terminals. In general, product supplied of each product in any given period is computed as follows: field production, plus renewable fuels and oxygenate plant net production, plus refinery and blender net production, plus imports, plus net receipts, plus adjustments, minus stock change, minus refinery and blender net inputs, minus exports."

My theory is that consumption actually picked up in 2015 with the novelty of low gas prices. People took long road trips, for example. But this novelty wore off in 2016.

I think the IEA measures global oil stocks, or at least those in OECD countries. Globally there is a lot of hidden/unreported storage. My own view is that US stock is a good proxy for global stock. That is global is probably some ratio to US, and that ratio is fairly stable. US stock has the advantage of being very close to the WTI crude and futures markets. So it is storage that is very sensitive to the financial markets.

 

[Oil4AsphaultOnly]

Another estimate for 2016 automotive li ion batteries for BYD produced vehicles 8,848,000 kWh EV Sales: (China) Buses & Batteries 2016

either way, while it may/may not match Panasonic, it definitely exceeds Tesla. So Tesla, like Nissan and Mitsubishi before, makes way for the new automotive entrant on the podium.

Looks like you've nailed it: EV Sales: Battery Makers 2016 (Cars)

6.7Gwh for Panasonic. I guess all the other customers of theirs didn't amount to a hill of beans. So BYD is the new battery king, what's next? Will we see a steeper decline in fossil fuel consumption in 2017 due to China's insatiable energy demand being met by electricity production?

 

[neroden]

Ah, yes, I forgot about petrochemical feedstock. Is this a climate change or other environmental issue? Plastic waste is a problem. But as feedstock, is natural gas okay?

Yeah, it's fine!

The thing that worries me most about heating is that it is needed most in Dec-Jan and this is precisely when solar production is lowest.

And it's needed most in the coldest locations where the heat pumps work most poorly, too.

Perversely, global warming is making this less of a problem by reducing heating loads.

I suspect that some sort of fuel will be needed to balance the season. Perhaps the gap however can be low enough that biofuels and fuels from surplus electricity can suffice.

We've always got hydroelectricity. Scandanavia has loads of it and so do Ontario and Quebec.

 

[RobStark]

EV salesblog does not take into account Panasonic cells in battery energy storage branded as Panasonic,Tesla or AES. The same as it does not include cells for buses under car batteries.

BYD is the king of their own market for 2016.

Panasonic purchases to make lithium ion cells for consumer electronics also gives them economies of scale. It does not buy x grade nickle for one another grade for the other.

Past performance does not guarantee future results. GF1 is just cranking up.

 

[neroden]

The death march of the IOCs continues:

Shell To Sell Another $5B In Assets, Misses Profit Expectations | OilPrice.com

The assets being auctioned by the IOCs are being bought by companies which are already losing money. I wonder who will be left holding the bag.

I've never been so glad to be out of the major market indexes. Both the financials and the oil companies are riding for a fall and they dominate the indexes.

 

[kenliles]

[QUOTE="neroden, post: 1959615, member: 7988]
I've never been so glad to be out of the major market indexes. Both the financials and the oil companies are riding for a fall and they dominate the indexes.[/QUOTE]
Ditto. Also market P/Es very high
Estimating Trump effects combined with this to eventually take hold for market correction. I've moved out of all securities except TSLA core long hold (80% of my TSLA position - the 20% layer of trade LEAPS now converted to TSLA stock and cash)

 

[jhm]

Please disregard the posts about bout fuel consumption declining. I turns out that the EIA is misreporting annual data. It is missing December, which explains the apparent decline.

 

[dakh]

Ditto. Also market P/Es very high
Estimating Trump effects combined with this to eventually take hold for market correction. I've moved out of all securities except TSLA core long hold (80% of my TSLA position - the 20% layer of trade LEAPS now converted to TSLA stock and cash)

I'm curious if anyone has a good handle on modeling the currency moves that will accompany the oil industry valuation drop we're predicting. Intuitively I think moving out of securities but holding US dollars nominated assets still isn't really a proper hedge, but I am fairly clueless what that proper hedge would be.

 

[kenliles]

I'm curious if anyone has a good handle on modeling the currency moves that will accompany the oil industry valuation drop we're predicting. Intuitively I think moving out of securities but holding US dollars nominated assets still isn't really a proper hedge, but I am fairly clueless what that proper hedge would be.

A fair question. I can only offer that I use income producing real-estate to hedge all securities (operating that macro moves of the market play against all securities and liquid currencies). But there are probably some good specific hedges for currency moves - not an area I trade, so maybe others can chime in