Shorting Oil, Hedging Tesla

[Doggydogworld]

Why has this thread gone so quiet?

Maybe because oil is stubbornly sitting at nearly twice the "upper bound" theorized when this thread started? Maybe because the terminal decline in oil consumption from the 2018 "peak" declared here instead turned out to be just another blip and we're actually on track to set a new all-time high? Who wants to discuss any of that?

 

[mspohr]

Maybe because oil is stubbornly sitting at nearly twice the "upper bound" theorized when this thread started? Maybe because the terminal decline in oil consumption from the 2018 "peak" declared here instead turned out to be just another blip and we're actually on track to set a new all-time high? Who wants to discuss any of that?

Still looks like peak for US was 2019

 

[ggies07]

Maybe because oil is stubbornly sitting at nearly twice the "upper bound" theorized when this thread started? Maybe because the terminal decline in oil consumption from the 2018 "peak" declared here instead turned out to be just another blip and we're actually on track to set a new all-time high? Who wants to discuss any of that?

I guess I need to post this again:

The IEA Confirms that Fossil Fuel Demand Is Peaking - RMI

The latest International Energy Agency outlook projects peak fossil fuel demand in every scenario and confirms a rapid clean energy transition is feasible.

rmi.org

And RMI has a whole series on it:

Peaking: A Theory of Rapid Transition - RMI

The Ukraine crisis shows that we must now act with speed, agility, coordination, and an integrated vision to create a prosperous climate-safe and energy-secure world.

rmi.org

 

[mspohr]

I guess I need to post this again:

The IEA Confirms that Fossil Fuel Demand Is Peaking - RMI

The latest International Energy Agency outlook projects peak fossil fuel demand in every scenario and confirms a rapid clean energy transition is feasible.

rmi.org

And RMI has a whole series on it:

Peaking: A Theory of Rapid Transition - RMI

The Ukraine crisis shows that we must now act with speed, agility, coordination, and an integrated vision to create a prosperous climate-safe and energy-secure world.

rmi.org

The Peaking article is excellent.

The gap in perspectives is illustrated by the bounce in demand we saw in 2021 or the current increase in capital expenditure to try to replace Russian supply. The orthodox view sees the bounce in demand in 2021 as the prelude to a new supercycle of growth, and the surge of capital expenditure as a harbinger of a massive increase in fossil fuel demand
.Our perspective would suggest that the bounce in demand in 2021 is simply a bump on the plateau of fossil fuel demand. That the high prices of fossil fuels resulting from the supply squeeze will inevitably result in lower demand. And that the future for fossil fuels is one of inexorable decline — punctuated by enthusiasm whenever one of the big fossil fuel exporters comes under pressure.

 

[petit_bateau]

I guess I need to post this again:

The IEA Confirms that Fossil Fuel Demand Is Peaking - RMI

The latest International Energy Agency outlook projects peak fossil fuel demand in every scenario and confirms a rapid clean energy transition is feasible.

rmi.org

And RMI has a whole series on it:

Peaking: A Theory of Rapid Transition - RMI

The Ukraine crisis shows that we must now act with speed, agility, coordination, and an integrated vision to create a prosperous climate-safe and energy-secure world.

rmi.org

A lot depends on when gas starts to go down. This is my forecast for 2023+ and actual for before.

 

[jhm]

Why has this thread gone so quiet?

I decided to go to seminary instead.

 

[mspohr]

Here's a bone...

The Revolutionary Potential of the Inflation Reduction Act

The direct-pay feature of the IRA creates an opportunity for the public sector to start building things again.

www.thenation.com

But under the IRA, the subsidies can now help anyone who wants to invest in green energy—no matter whether they have a tax liability or not. In this sense, the money functions like a grant, allowing the vast range of nonprofit and public entities to claim the full value of the credit, just as private firms can. Because Wall Street won’t be siphoning off some of the funds, direct pay could double the impact of every federal dollar spent, according to the Bipartisan Policy Center.

 

[mspohr]

The Chubb corporation, one of the world's top fossil fuel insurers, recently announced that they will no longer insure oil and gas extraction projects in the Arctic National Wildlife Refuge! This win is thanks to all of you who stood with the Gwich'in and urged Chubb to take this significant step forward. Insurance is a vital component for oil and gas developers. Without it, they can't move forward on projects. Chubb's decision has set a new standard when it comes to insuring oil and gas in the Arctic. While there is still room for improvement, this policy provides a model for other insurance companies to use and makes it harder for oil and gas firms to drill in the Arctic.

 

[ggies07]

Texas Could Be the World’s Clean Energy Capital—If It Wants to Be

There’s just one problem: politics

time.com

Bobby Tudor made a fortune in fracking. The clean-cut financier opened shop in 2007 and spent the next 10 years backing large-scale projects in West Texas, supercharging one of history’s greatest oil and gas expansions. But over lunch in February, even as he predicted that oil and gas would be around for the foreseeable future, Tudor offered a dimmer view of the industry’s role in the region. “Oil and gas is just not going to be the same engine for growth,” he told me. “It will flatten, and then it will decline.”

 

[bruce4000]

Texas Could Be the World’s Clean Energy Capital—If It Wants to Be

There’s just one problem: politics

time.com

Turns out Fracking can produce a lot of oil but have to drill new wells every 2 years so not so great for investor profits and the best well locations have mostly been drilled.

 

[mspohr]

Opinion | Will Texas Blow Up Its Energy Miracle to Bolster Fossil Fuels?

Legislators are moving to erect barriers to clean energy development while providing incentives for fossil fuels.

www.nytimes.com

The Texas Legislature is moving to erect barriers to clean energy development while providing incentives for fossil fuel production. This would make the task of reducing emissions much harder. And it comes even though oil and gas production has continued to grow, though not at the pace of the market’s embrace of wind and solar.

Lawmakers are debating a range of bills that would mandate and subsidize more natural gas power plants, provide tax incentives for fossil fuels, punish renewables and make it easier to stop clean energy projects.

 

[jhm]

https://twitter.com/x/status/1661598276544524289

For every $1 invested in clean energy, $0.59 is still invested in fossil energy. This is progress. It was $1 to $1 five years ago.

I wonder if fossil investment is low enough that we should start to see post-peak declines.

One worried oil investor shared this tweet.

https://twitter.com/x/status/1661616609386004480

I'm not sure where he got this chart. Looks on brand for BP. At any rate, I hope that the investment level in oil is low enough that production drops below 80 mbpd by 2030.

 

[navguy12]

I wonder how much primary energy is being harvested with that 1.75 trillion versus primary energy being mined for ~1.05 trillion.

Understanding, of course, that electricity is more useful than raw petroleum.

 

[Oil4AsphaultOnly]

https://twitter.com/x/status/1661598276544524289

For every $1 invested in clean energy, $0.59 is still invested in fossil energy. This is progress. It was $1 to $1 five years ago.

I wonder if fossil investment is low enough that we should start to see post-peak declines.

One worried oil investor shared this tweet.

https://twitter.com/x/status/1661616609386004480

I'm not sure where he got this chart. Looks on brand for BP. At any rate, I hope that the investment level in oil is low enough that production drops below 80 mbpd by 2030.

Am I reading this right? Aren't we spending almost as much (in total dollar terms) in fossil fuel investments as we did in 2019?!

Edit: upon second reading, there's something definitely wrong with it, since no way did we invest more in clean energy than fossil fuels in 2017.

 

[mspohr]

View attachment 940937

I wonder how much primary energy is being harvested with that 1.75 trillion versus primary energy being mined for ~1.05 trillion.

Understanding, of course, that electricity is more useful than raw petroleum.

Probably better to look at delivered energy rather than primary energy since fossil fuels are so inefficient.

 

[navguy12]

Probably better to look at delivered energy rather than primary energy since fossil fuels are so inefficient.

Agreed.

Those Lawrence Livermore National Laboratory energy flow charts certainly illustrate that fact with about 60% of the raw energy inputs required to run the (US) economy being wasted (rejected) as heat.

I guess my original question could be rephrased to ask how much ”useful energy services“ are being purchased with that 1.75 trillion versus the 1.05 trillion.

And as I compose that rephrased question, why isn’t all wealth spent on energy actually based on energy services versus the raw energy potential of mined but unprocessed fossil fuels?

 

[jhm]

This is also worth mention from the IEA report.

Of course, it's cute that solar investment is surpassing oil investment, but notice how much oil investment has come down!

$370B a year does not seem like quite enough to grow supply. I'm not sure where the threshold is exactly, but this a huge decline for much of the oil industry.

 

[jhm]

IEA coming out with more positive news about renewables: 440GW installed this year, 65% solar.

https://twitter.com/x/status/1664135153734631433

Ok, let's put this into perspective. From 2011 to 2021, world power generation grows 2.5% per year, reaching about 28,500 TWh in 2022. See link below.

440GW of renewables should generated about 1040 TWh per year assuming a combined 27% CF. This is about 3.6% of the 2022 level.

If total gen continues to grow 2.5%, this implies a 1.1% reduction non-renewable generation (inclusive of hydro and nuclear). I suspect RE installation rates are now high enough to force fossil generation into secular decline.

Electricity production by source

An interactive visualization from Our World in Data.

ourworldindata.org

 

[replicant]

Executive summary – Oil 2023 – Analysis - IEA

Oil 2023 - Analysis and key findings. A report by the International Energy Agency.

www.iea.org

Based on existing policy settings, growth in world oil demand is set to slow markedly during the 2022-28 forecast period as the energy transition advances. While a peak in oil demand is on the horizon, continued increases in petrochemical feedstock and air travel means that overall consumption continues to grow throughout the forecast. We estimate that global oil demand reaches 105.7 mb/d in 2028, up 5.9 mb/d compared with 2022 levels.

Crucially, however, demand for oil from combustible fossil fuels – which excludes biofuels, petrochemical feedstocks and other non-energy uses - is on course to peak at 81.6 mb/d in 2028, the final year of our forecast. Growth is set to reverse after 2023 for gasoline and after 2026 for transport fuels overall. These trends are the result of a pivot towards lower-emission sources triggered by the global energy crisis, as well as policy emphasis on energy efficiency improvements and the rapid growth in electric vehicle (EV) sales.

 

[Doggydogworld]

At least IEA finally sees a peak, though they still think it's not until 2029 or later. I still say 2026-27, as I have for 6+ years. I admit I kinda hand-waved air travel and petrochem, though.

This NPR article talks about Texas wildcatters with a rare show of discipline. Or to be more accurate, discipline from their investors. IMHO investors are starting to see the peak and act accordingly. That said, bouts of sanity in the oil patch tend to be short-lived.

US crack spreads (3rd and 4th charts) have come down, but are still much higher than pre-2022 levels. Diesel crack spiked the highest, but has recently fallen below gas. Only a few months ago it was common to see diesel priced $1 per gallon higher than gas. Just this week I was shocked to see stations where it's now 10-20 cents less than gas.

I don't really understand why crack spreads remain so high. We did lose ~5% of capacity during Covid, and refiners are understandably reluctant to make 40 year investments in replacement capacity with the peak in sight. But utilization rates are actually lower than pre-Covid, so it's not a simple capacity crunch. I suspect the war and Russian oil import embargo have starved some refineries of the grades they were designed to process, so they're running inefficiently on the grades they are actually able to purchase.