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Hmm, I'm still not quite understanding your point. How does a DUC maximize NPV?
I haven't read anyone suggesting that a DUC is some sort of insurance policy or even hedge. Rather, it is inventor of work in progress. Since there is sunk cost in a DUC, it may still be marginally profitable to complete even if oil drops to $30/b. However, producer may never recover the sunk cost of the DUC if low oil prices persist. So basically a producer may need to write down the cost of the DUC, even as they are completing it and bringing it into production. But the whole investment can ultimately prove unprofitable. So I don't see this as any kind of insurance. Rather, there is still a need to hedge a DUC against oil prices falling so hard that it results in a loss.
As an observer of supply, we care about DUCs because a large DUC inventory can resist a supply response to a price downturn. So part of what is dumb about the OPEC strategy is that they propped up oil prices just enough for US shale to expand a DUC inventory and hedge it. And this locks in a certain amount of supply regardless of short term price changes.
BTW, US shale is set to add 122kb/d next month, and given that annual consumption is expected to grow about 1.3 mb/d, it appears that US shale alone is on track to absorb this growth. That potentially leaves negative net demand growth for all other oil producers. It's curious that OPEC has been so insistent on long-term demand growth, but if prices are high enough, US shale could swallow up all that growth. So even their effort to send a positive message to the market results in stimulating investment in shale. It's got to be maddening. In hindsight, OPEC should have never engaged in a price war. They only succeeded in making US shale leaner sooner and killing revenue for the whole industry.
Hey, maybe Musk could come up with an eDiesel pickup that only offsets demand for diesel with electricity. It could rattle like a diesel and blow out rainbow bubbles as it speeds past other diesel trucks.
I was surprised they went semis before pickups too, but if they are going after pollution semis are where to start I guess, my understanding is they pollute much more than passenger vehicles.
I think Giles missed the opportunity to point out how this actually demonstrates the absurdity of low feed-in-tariffs. The cost of using excess solar power this was is actually an opportunity cost. Suppose the network was paying a 15c/kWh FiT for this. Then that cool air on the veranda would need to be worth 15c/kWh to the owner. But suppose the FiT was just 1c/kWh. Then blowing aircon on the patio using surplus solar is only missing out on 1 c/kWh, and many owners may be quite willing to splurge on that.
So the issue here is not really about how cheap solar is to install, but how little value it is given in many Ausie FiTs. Giles is pointing out the double billing on T&D used to justify ridiculously low FiTs. But these FiTs are ridiculous because they are far from true market prices. When neighbors are able to trade surplus solar or battery capacity with each other, it may be much more attractive to sell surplus at 10c/kWh to a neighbor than 1c/kWh for a FiT or just blowing aircon on the veranda.
Methane synthesis adds more cost. But I agree that it makes sense due to easier handling. We also already have a massive methane storage and distribution system and, crucially, we can and do produce a lot of biogas. However, HFC could be better for isolated locations where storage would be for short periods.
Successful electrification should eat into demand for diesel and natural gas. The ultimate target, of course, is to reduce fossil demand by enough that biofuels and synthesis can be used for the rest.
Hey, let's use that handy dandy infographic and the marginality of diesel to estimate impact. So let's go with 50 miles per barrel for semis. That is 10 gal/b using their figure of 5 mpg. We also know that the average semi burns through 11,340 gal per year. So that works out to 3.1 b/d per semi truck.
So about 322,580 electric semis could disrupt demand for 1mb/d of crude. Dang! But what does this disruption mean? This depends on just how much excess demand there is for diesel over gasoline. If you really had about 322k electric semis, would that be enough to make gasoline or other the marginal product? If not, then crude consumption falls 1mb/d, and gasoline prices rise a little. But if gasoline becomes the marginal product, then the price of gasoline goes up more substantially, taking on a premium to diesel. This, of course, would support demand growth for EVs. As the EV product offering become more diverse and compelling, EVs could level out any cross-subsidization between diesel and gasoline, leading to an equilibrium where neither is the marginal product. That equilibrium may make jet fuel the marginal product. I doubt that petrochemicals or PGLs would become the marginal product anytime soon because natural gas is so cheap as an alternative feedstock.
So try to imagine the implications of jet fuel becoming the marginal product as a result of EV disrupting ground transportation. But first we disrupt diesel. I'd also point out that diesel demand is likely to be much more closely connected with economic growth. Private passenger cars are mostly a convenience to consumers, but a growing economy need trucks, buses, and tractors in a much more fundamental way. So disrupting diesel could have a more profound impact on decoupling oil from the economy than displacing gasoline would.
Can't agree here. Isolated locations and short-period storage would be better served by batteries. Isolated locations and medium-to-long term storage should be done with something that isn't capable of leaking through the very walls of the tank that's containing it. Also, CF-wrapped high-pressure hydrogen tanks have a life-span of about 14 years, never mind the durability of the valves and seals that holds that regulates that pressure. CNG tanks, being at half the pressure WILL last longer.
Yeah, but don't let it leak!
The sabatier process takes CO2 and H2O to produce CH4. So long as less than 3% of the produced methane leaks, it'll still be a carbon negative operation (methane being 30 times more potent than CO2 as a greenhouse gas).
adiggs
Well-Known Member
This is my thinking as well - use renewable energy to take carbon out of the atmosphere and turn it into methane. Then burn it later (winter) for heat / electricity.
In this case, your carbon cycle is neutral.
And heck - maybe this is the start of a carbon capture cycle. Make methane and instead of storing it for the winter, pump it back underground and eventually seal up the well. Methane might not be the right or best chemical form, but the idea is the same.
adiggs
Well-Known Member
Hey, maybe Musk could come up with an eDiesel pickup that only offsets demand for diesel with electricity. It could rattle like a diesel and blow out rainbow bubbles as it speeds past other diesel trucks.
Rolling rainbows. I SO want to see that Youtube video
further thoughts re China, my very rough modelling
2018 8% 28,000,000 4% credits from 4 credit EVs = 280,000 EVs + 4% credits from 2 credit PHEVs 560,000 PHEVs (840,000 total)
2019 10% 29,000,000 5% credits from 4 credit EVs = 360,000 EVs + 5% credits from 2 credit PHEVs 725,000 PHEVs (1,090,000 total)
2020 12% 30,000,000 6% credits from 4 credit EVs = 450,000 EVs + 6% credits from 4 credit PHEVs 900,000 PHEVs (1,350,000 total)
ICE vehicle sales still increases YOY for 2018,2019,2020
sanity check
2016 China sold about 260,000 car EVs and 90,000 car PHEVs
hmmmm
Chinese companies (EV) can meet target, very easily. Foreign companies (PHEV) have a significant challenge ahead, but not unrealistic.
I suspect foreign companies will use profits from ICE sales to crowd out the native companies profits in EVs, towards the 2020, but the native companies will get money up front around 2018 from the foreign companies to meet quota.
I also foresee major over-compliance leading to cheap credits. similar to CARB in USA. just switch the PHEV/EV ratio around like it is in real life.
2018 8% 28,000,000 4% credits from 4 credit EVs = 280,000 EVs + 4% credits from 2 credit PHEVs 560,000 PHEVs (840,000 total)
2019 10% 29,000,000 5% credits from 4 credit EVs = 360,000 EVs + 5% credits from 2 credit PHEVs 725,000 PHEVs (1,090,000 total)
2020 12% 30,000,000 6% credits from 4 credit EVs = 450,000 EVs + 6% credits from 4 credit PHEVs 900,000 PHEVs (1,350,000 total)
ICE vehicle sales still increases YOY for 2018,2019,2020
sanity check
2016 China sold about 260,000 car EVs and 90,000 car PHEVs
hmmmm
Chinese companies (EV) can meet target, very easily. Foreign companies (PHEV) have a significant challenge ahead, but not unrealistic.
I suspect foreign companies will use profits from ICE sales to crowd out the native companies profits in EVs, towards the 2020, but the native companies will get money up front around 2018 from the foreign companies to meet quota.
I also foresee major over-compliance leading to cheap credits. similar to CARB in USA. just switch the PHEV/EV ratio around like it is in real life.
Nice! Looks consistent with hitting 5 million total EVs (globally) in 2020.
You might try adding in electric buses, which were 116k in 2016 IIRC. Also I expect other heavy EVs will emerge.
The problem with batteries is that capacity is expensive and power is even more expensive (because it multiplies the need for capacity).
If HFC ever fulfills its promise, it'd be because it's cheap per kW (that's the DoE's story and they're sticking to it). Capacity is based on the size of the fuel tank.
When I say short-period storage I'm talking about days, rather than the weeks or months that we'd need for seasonal energy demand. Methane is the obvious choice for that.
Not that methane's great either. As much as people rail against hydrogen there are plenty of methane explosions. Maybe energy can get to the point of being cheap enough that we'll be able to afford to synthesize larger molecules that are easier to manage.
I would expect significant over-compliance in China, the risk/reward profile leads to over-compliance.
Also California's CARB ZEVs is about as useful as tits on a bull. Primarily because their bureaucrats expected Tesla to amount to about Fisker levels of success. So there is a massive overcompliance for CARB also.
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The new EIA weekly report is out: http://ir.eia.gov/wpsr/overview.pdf
Commercial crude stock is down 1.8 mb w/w and up 11.0 mb y/y.
Total commercial crude and products is up 3.5 mb w/w and down 4.6 mb y/y.
Comment, the market is more or less balance weekly and annually.
Total net imports at 4631 kb/d continue to fall 273 kb/d w/w and 884 kb/d y/y or down 15.1%.
Domestic crude production at 9305 kb/d is down 9 kb/d w/w and up 445 kb/d y/y or up 5.2%
Domestic consumption is down sharply 1061 kb/d w/w and 441 kb/d or down 2.2%.
Domestic gasoline consumption is down 2.5% y/y, distillates down 0.8% y/y, but only jet fuel up 6.1% y/y.
Comment, continuing decline in consumption accounts for about half of the decline in net imports. Increase in domestic crude production is the other half. This is clear in the annual changes. The weekly changes are more volatile and subject to near term fluctuations in inventory.
If distillates are to remain the marginal product, that likely would depend exports not domestic consumption which is declining. Only jet fuel is growing in domestic demand. So either jet fuel overtakes distillates as the marginal product or the marginal product is an export. So it is a curious realization that even now the marginal product may well be an export.
Commercial crude stock is down 1.8 mb w/w and up 11.0 mb y/y.
Total commercial crude and products is up 3.5 mb w/w and down 4.6 mb y/y.
Comment, the market is more or less balance weekly and annually.
Total net imports at 4631 kb/d continue to fall 273 kb/d w/w and 884 kb/d y/y or down 15.1%.
Domestic crude production at 9305 kb/d is down 9 kb/d w/w and up 445 kb/d y/y or up 5.2%
Domestic consumption is down sharply 1061 kb/d w/w and 441 kb/d or down 2.2%.
Domestic gasoline consumption is down 2.5% y/y, distillates down 0.8% y/y, but only jet fuel up 6.1% y/y.
Comment, continuing decline in consumption accounts for about half of the decline in net imports. Increase in domestic crude production is the other half. This is clear in the annual changes. The weekly changes are more volatile and subject to near term fluctuations in inventory.
If distillates are to remain the marginal product, that likely would depend exports not domestic consumption which is declining. Only jet fuel is growing in domestic demand. So either jet fuel overtakes distillates as the marginal product or the marginal product is an export. So it is a curious realization that even now the marginal product may well be an export.
Is This The Beginning Of The End For Gasoline In Asia’s Largest Markets? | OilPrice.com
Hey, Renim, did you see this? China is targeting EV for 20% of new cars by 2025. Is that what you are basing your forecast on?
If China hits 20% EV by 2025 and India 100% by 2032, I think well be in good position to hit 25% globally by 2025. This would be sufficient to have peak oil demand by 2025.
Hey, Renim, did you see this? China is targeting EV for 20% of new cars by 2025. Is that what you are basing your forecast on?
If China hits 20% EV by 2025 and India 100% by 2032, I think well be in good position to hit 25% globally by 2025. This would be sufficient to have peak oil demand by 2025.
adiggs
Well-Known Member
Weird thought reading that article on oilprice - have you noticed how commonly an article refers to either EVs in general, or Tesla's in particular, by using a photo of a Model S at a supercharger? The analogue in the ICE world would be if we always saw an F150 photographed at a gas pump
I really don't have much of a conclusion to draw from it - just that it struck me as interesting, and on balance, I think it's fantastic for Tesla in particular. The other EV's don't get pictured plugged into a 110v or some other public charging infrastructure, but Tesla is getting free advertising all the time for how easy and ubiquitous it is to charge one (it must be - they're always plugged into the same thing, a Supercharger, right?).
China will be China, a very electric future.
India won't get anywhere near those targets, and even after India's PH/EVs sales exceed ICE, India will still increase consumption of oil.
Re India
Cultural factors, the aural signature of a vehicle is a massive input into their safe driving methods, EVs strongly feel compromised in that regards.
India has a low base of vehicles, new vehicles are incremental, even when they become diminishing in new sales.
Japanese quality, Indian maintenance, India's fleet is now very Japanese in design, I expect 40year longevity, because you just know, those SuzukiMarutis are going to on the road for a very very long time.
Indian cars are very fuel efficient misers, 3 cyl, 1200cc, often diesel, they gain 12V li ion hybridization regenerative braking. Very cheap, still road-trip worthy, very hard to compete with economically for BEVs. Current benchmark for India Best Mileage Cars in India - 2017's Top Fuel Efficient Cars FWIW a 12V hybrid diesel in India cost about 1/4 of what the Toyota Prius does, and uses less fuel than the Prius. 2017 Toyota Prius Hybrid India Price, Specifications & Details
my gut feeling is that an EV in India creates more CO2 than its cheap 12V diesel equivalent...
I could go on, but India is a small but populous and diverse country. They won't go over the crest to EV land readily
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