Shorting Oil, Hedging Tesla

[jhm]

Yeah, it's interesting how the talk now about oil peak is all about a flat peak or plateau. Air travel and petrochem growth is not really the driver of the peak. Rather ICE displacement by batteries is. The timing and sharpness of the peak depends on how fast EV and batteries grow. If you think that EVs will take another 4 or 5 years to double, then you get a flat peak that is 4 or 5 years out. But if EVs double in the next 2 years, then the peak comes much sooner, perhaps even 2023 and the plateau is very short.

So most of these "conservative" forecasters will have to move their peaks up sooner every year that their EV uptake forecast underpredicts.

Roughly speaking 14M new EVs in 2023 will put about 0.5 mbpd of downward pressure on oil demand. This is resisted by about 0.5 mbpd of upward pressure from petrochem and jet fuel demand growth. So looking forward to 2024 it is hard to tell which way this will net out, i.e., plateau. But suppose EVs double in two years, 2025. Thus the downward pressure of EVs is about 1.0 mbpd against about 0.5 mbpd of upward pressure. Thus the net downward pressure is about 0.5 mbpd. This is still slight enough that other transitory noise could goof up the peak, but most likely the decline will be near 0.5 mbpd. Look out 3 more years to 2027 EV push down 2.0 mbpd totally overwhelming the 0.5 mbpd other growth. A 1.5 mbpd net decline will be unmistakable and painful for the oil industry.

Thus, we are just 2 more doublings of EVs away from a real crisis in the oil industry. It matters an awful lot whether it takes another 8-10 years to get two more doublings or whether that happens within the next 4 years. The oil industry is desperately hoping EV uptake will slow down.

 

[petit_bateau]

Yeah, it's interesting how the talk now about oil peak is all about a flat peak or plateau. Air travel and petrochem growth is not really the driver of the peak. Rather ICE displacement by batteries is. The timing and sharpness of the peak depends on how fast EV and batteries grow. If you think that EVs will take another 4 or 5 years to double, then you get a flat peak that is 4 or 5 years out. But if EVs double in the next 2 years, then the peak comes much sooner, perhaps even 2023 and the plateau is very short.

So most of these "conservative" forecasters will have to move their peaks up sooner every year that their EV uptake forecast underpredicts.

Roughly speaking 14M new EVs in 2023 will put about 0.5 mbpd of downward pressure on oil demand. This is resisted by about 0.5 mbpd of upward pressure from petrochem and jet fuel demand growth. So looking forward to 2024 it is hard to tell which way this will net out, i.e., plateau. But suppose EVs double in two years, 2025. Thus the downward pressure of EVs is about 1.0 mbpd against about 0.5 mbpd of upward pressure. Thus the net downward pressure is about 0.5 mbpd. This is still slight enough that other transitory noise could goof up the peak, but most likely the decline will be near 0.5 mbpd. Look out 3 more years to 2027 EV push down 2.0 mbpd totally overwhelming the 0.5 mbpd other growth. A 1.5 mbpd net decline will be unmistakable and painful for the oil industry.

Thus, we are just 2 more doublings of EVs away from a real crisis in the oil industry. It matters an awful lot whether it takes another 8-10 years to get two more doublings or whether that happens within the next 4 years. The oil industry is desperately hoping EV uptake will slow down.

For oil I think we are there, now. And my personal opinion is that it will go faster than this forecast of mine. For total fossils the gas will prop it up a bit longer. But sometime over the next 5-years people who have to put their own real money on the table will stop drilling new wells for either oil or gas. I think a lot of the projects that are getting approved are in essence somebody else's money that is being put at risk by the decision makers.

 

[RobStark]

OPEC says oil demand will hit 110 million barrels per day in 2045

Global oil demand will rise to 110 million barrels a day in two decades, bringing the world's energy demand up 23%, said OPEC.

www.cnbc.com

 

[petit_bateau]

OPEC says oil demand will hit 110 million barrels per day in 2045

Global oil demand will rise to 110 million barrels a day in two decades, bringing the world's energy demand up 23%, said OPEC.

www.cnbc.com

Y'all can see just how ROPEC does its projections to get a 110 mln bbl/d in 2045 result !

(not even a spreadsheet required, just a straight ruler and a pencil on a graph)

 

[RobStark]

We gonna need a lot more batteries.

 

[Dave EV]

We gonna need a lot more batteries.

View attachment 954146

Just eyeballing it, it looks like around 200 GWh of batteries should allow us to flatten it out.

With 4-hour duration storage project today, that's about 50 GW of power on tap, which sounds about right.

CAISO has added about 5 GW of batteries in the last 5 years - I highly doubt it will take another 9 years to get to 50 GW - I bet we get there in 5 years or so.

 

[Patrick66]

Just eyeballing it, it looks like around 200 GWh of batteries should allow us to flatten it out.

There are about 13 million households in California, so that would be about 15kWh/household which sounds high but not crazy.

My guess is that they need about 50GWh to absorb ~7GW of solar over 8-8.5 hours and discharge ~10GW over ~5 hours.

 

[Oil4AsphaultOnly]

There are about 13 million households in California, so that would be about 15kWh/household which sounds high but not crazy.

My guess is that they need about 50GWh to absorb ~7GW of solar over 8-8.5 hours and discharge ~10GW over ~5 hours.

My powerwalls have been participating in a few VPP events this week, so I think there's a substantial amount of that stationary storage ALREADY deployed. I think the utilities are going to be surprised at how little wind/solar curtailment they'd actually need to do.

 

[MC3OZ]

Y'all can see just how ROPEC does its projections

I think that should be :- HOPEC

 

[Doggydogworld]

We gonna need a lot more batteries.

EVs have batteries. Gorge on 2 cent solar farm kWhs all day long while parked at work, power the house during the evening peak via V2H.
200 GWh is ~3 million BEVs. That's only 10% of CA's light vehicle fleet.

Stationary batteries are the dumb, brute force approach. Utilities want stationary because their regulators let them add the cost to customer bills. Stationary battery manufacturers and salesmen are obviously in favor. Politicians want them because the more subsidies they dole out the more personal power they have. No one has an incentive to make the intelligent choice. Except the citizenry, obviously, but they don't matter.

 

[ggies07]

World at ‘beginning of end’ of fossil fuel era, says global energy agency

Global demand for oil, natural gas and coal expected to peak before end of 2030

www.ft.com

Birol said: “Oil and gas companies may not only be misjudging public opinion . . . they may well be misjudging the market if they expect further growth of oil and gas demand across this decade.“New large scale fossil fuel projects carry not only major climate risks but major financial risks.”

 

[jhm]

Demand for oil, gas and coal will peak by 2030, but that's not fast enough to keep global warming within 1.5 degrees, says IEA chief

Demand for fossil fuels are set to peak by 2030, says Fatih Birol, chief of the IEA. That's "nowhere near steep enough" to keep global warming to 1.5 degrees.

www.cnbc.com

“Based only on today’s policy settings by governments worldwide — even without any new climate policies — demand for each of the three fossil fuels is set to hit a peak in the coming years. This is the first time that a peak in demand is visible for each fuel this decade — earlier than many people anticipated,” Birol said.

This is teasing a new IEA report that will come out in October. Birol is hinting that demand peak estimates will be bumped up sooner.

It's been frustrating that demand growth has been strong this year. My hunch is that we're still seeing Covid-19 rebound demand. As those issues normalize, we could see demand growth stall out. IEA may be trying to get out ahead of this, by lowering near term growth expectations.

They were saying that annual demand growth would slow to 0.4mbpd by 2028. Let's see how much they backpedal in October!

 

[jhm]

OPEC launches latest broadside against the IEA over peak oil prediction

IEA says fossil fuel demand likely to peak before 2030 OPEC accuses IEA of torpedoing needed oil investment Climate change vs energy security debate inflamed OPEC has hit out again at the Internationa

www.spglobal.com

This is amusing to see OPEC attack IEA. It's clear how ideological OPEC forecasts are. They fear "dire" economic consequences from any kind of projection on within the next couple of decades.

OPEC is going to be in a world of hurt when the secular decline begins and they're still claiming the peak is decades away.

Keep track of these respective projections.

OPEC, in its latest short-term oil market report published Sept. 12, forecast that 2024 global oil demand would reach 104.3 million b/d, a rise of 2.3 million b/d from 2023.

The IEA, in its monthly oil market forecast on Sept. 13, downgraded its 2024 oil demand projection to a more measured 102.8 million b/d, up 1 million b/d from 2023.

There is a huge 1.5mbpd discrepancy between these two projections for 2024 demand. At least one of them will need to do serious backpedalling over the next year.

It's weird that OPEC is worried that the IEA narrative will depress oil investment, which would reduce supply and drive up the price. Basically, higher oil prices would be a boon for OPEC members. So if they really believe that US shale and other producers will underinvest, why not OPEC put their money into their own oil fields and boost production? It doesn't quite add up for me. Maybe someone can explain it.

 

[petit_bateau]

OPEC launches latest broadside against the IEA over peak oil prediction

IEA says fossil fuel demand likely to peak before 2030 OPEC accuses IEA of torpedoing needed oil investment Climate change vs energy security debate inflamed OPEC has hit out again at the Internationa

www.spglobal.com

This is amusing to see OPEC attack IEA. It's clear how ideological OPEC forecasts are. They fear "dire" economic consequences from any kind of projection on within the next couple of decades.

OPEC is going to be in a world of hurt when the secular decline begins and they're still claiming the peak is decades away.

Keep track of these respective projections.


There is a huge 1.5mbpd discrepancy between these two projections for 2024 demand. At least one of them will need to do serious backpedalling over the next year.

It's weird that OPEC is worried that the IEA narrative will depress oil investment, which would reduce supply and drive up the price. Basically, higher oil prices would be a boon for OPEC members. So if they really believe that US shale and other producers will underinvest, why not OPEC put their money into their own oil fields and boost production? It doesn't quite add up for me. Maybe someone can explain it.

I'm watching to see if my forecast comes closer than the IEA one when we do finally hit peak fossil. Like you, I think there are still post-Covid and Ukraine issues washing through the system, plus increasingly it looks as if China is suffering internally. But always in the world something is going on, so we just need to accept that when forecasting.

 

[mspohr]

OPEC launches latest broadside against the IEA over peak oil prediction

IEA says fossil fuel demand likely to peak before 2030 OPEC accuses IEA of torpedoing needed oil investment Climate change vs energy security debate inflamed OPEC has hit out again at the Internationa

www.spglobal.com

This is amusing to see OPEC attack IEA. It's clear how ideological OPEC forecasts are. They fear "dire" economic consequences from any kind of projection on within the next couple of decades.

OPEC is going to be in a world of hurt when the secular decline begins and they're still claiming the peak is decades away.

Keep track of these respective projections.


There is a huge 1.5mbpd discrepancy between these two projections for 2024 demand. At least one of them will need to do serious backpedalling over the next year.

It's weird that OPEC is worried that the IEA narrative will depress oil investment, which would reduce supply and drive up the price. Basically, higher oil prices would be a boon for OPEC members. So if they really believe that US shale and other producers will underinvest, why not OPEC put their money into their own oil fields and boost production? It doesn't quite add up for me. Maybe someone can explain it.

It still looks like 2019 is peak at 100 m b/d.
We'll see if 2023 will surpass that. Lots of things going on (price, economic disruption, etc.).

 

[traxila]

I don't see any running calculations of oil usage displaced based on BEV sales at all in the MM. Best I could find was on the IEA:

The global auto industry is undergoing a sea change, with implications for the energy sector, as electrification is set to avoid the need for 5 million barrels of oil a day by 2030.​

Think they are off by at least 50%.

I went with 20 million electric cars in the global fleet right now displacing 300 gallons per year of usage (conservative I believe) which works out to about 400K barrels per day of demand destruction. Does this jive with the numbers of the members here?

This is going to ramp exponentially with the new BEV sales.

OPEC is deathly afraid of the margins. 100 mbpd produced with only 98 mbpd consumed would cause a ridiculous price spiral downwards in a matter of weeks. They will cut production of course, but how will the next round go as oil consumption continues to fall? The oil companies and countries are in a tight spot, but they know how to deal with this.

Wars anyone?

 

[navguy12]

Wars anyone?

Yes, via the disinformation that has been pumped from various Russian troll farms against various democracies over the past twenty years.

To the oil powered dictatorships of the world, a 4680 cell is more lethal than a 22 mm slug.

 

[dhrivnak]

Yeah, it's interesting how the talk now about oil peak is all about a flat peak or plateau. Air travel and petrochem growth is not really the driver of the peak. Rather ICE displacement by batteries is. The timing and sharpness of the peak depends on how fast EV and batteries grow. If you think that EVs will take another 4 or 5 years to double, then you get a flat peak that is 4 or 5 years out. But if EVs double in the next 2 years, then the peak comes much sooner, perhaps even 2023 and the plateau is very short.

So most of these "conservative" forecasters will have to move their peaks up sooner every year that their EV uptake forecast underpredicts.

Roughly speaking 14M new EVs in 2023 will put about 0.5 mbpd of downward pressure on oil demand. This is resisted by about 0.5 mbpd of upward pressure from petrochem and jet fuel demand growth. So looking forward to 2024 it is hard to tell which way this will net out, i.e., plateau. But suppose EVs double in two years, 2025. Thus the downward pressure of EVs is about 1.0 mbpd against about 0.5 mbpd of upward pressure. Thus the net downward pressure is about 0.5 mbpd. This is still slight enough that other transitory noise could goof up the peak, but most likely the decline will be near 0.5 mbpd. Look out 3 more years to 2027 EV push down 2.0 mbpd totally overwhelming the 0.5 mbpd other growth. A 1.5 mbpd net decline will be unmistakable and painful for the oil industry.

Thus, we are just 2 more doublings of EVs away from a real crisis in the oil industry. It matters an awful lot whether it takes another 8-10 years to get two more doublings or whether that happens within the next 4 years. The oil industry is desperately hoping EV uptake will slow down.

Looking at oil data it appears we are already at a plateau as peak oil appears to have been 2018 peak ICE cars was in 2017.

 

[petit_bateau]

I don't see any running calculations of oil usage displaced based on BEV sales at all in the MM. Best I could find was on the IEA:

The global auto industry is undergoing a sea change, with implications for the energy sector, as electrification is set to avoid the need for 5 million barrels of oil a day by 2030.​

Think they are off by at least 50%.

I went with 20 million electric cars in the global fleet right now displacing 300 gallons per year of usage (conservative I believe) which works out to about 400K barrels per day of demand destruction. Does this jive with the numbers of the members here?

This is going to ramp exponentially with the new BEV sales.

OPEC is deathly afraid of the margins. 100 mbpd produced with only 98 mbpd consumed would cause a ridiculous price spiral downwards in a matter of weeks. They will cut production of course, but how will the next round go as oil consumption continues to fall? The oil companies and countries are in a tight spot, but they know how to deal with this.

Wars anyone?

Oil into auto fuels will fairly closely follow the auto numbers curves, i.e. the 'stock' of autos on the road. Just multiply out by mpg and etc.

As you say the resultant oil margin price wars may beget real wars. The Middle East doesn't buy all that weaponry for no reason. Venezuela and Nigeria are hugely exposed, neither are cheap places to pump oil. Nor is Russia. Nor for that matter is USA.

=========

Here are the numbers for production (my forecast)

 

[SummerlinChiro]

Followers of this forum would be served by reading the works of Julian Simon

Here is a good place to start:

Scarcity or Abundance? A Debate on the Environment

Julian Simon won a famous bet against Paul Ehrlich, but Ehrlich's Malthusian POV maintains its hold on popular culture