Shorting Oil, Hedging Tesla

[Doggydogworld]

The article is a lot more detailed and nuanced than the quote you pulled out of context.
It would require an extreme effort. That's why it would be good to have the US help.

No, the "pull every lever" quote only applies to a partial disruption and doesn't cover winter:

"Europe may be able to cope if supply disruptions are limited to Ukraine transit. It would have to pull every lever in the energy system to keep the lights on – reducing gas burn and cranking up mothballed nuclear and coal plants; maximising indigenous gas production and pipeline imports; persuading Asian buyers to use coal and free up LNG.

“But this would only be a temporary solution to get through the summer and would leave Europe with perilously low storage volumes going into winter 2022/23 and risks demand disruptions.

The dire portion I quoted above refers to a total shutdown of Russian gas imports. You say Europe can handle that. Wood Mac very emphatically says they cannot. There is no "nuance" about it.

Oil is a different story. The US and Europe could cut off Russian oil exports. It'd require some temporary rationing and strategic reserve usage while we scramble to increase production domestically and from the middle east, Venezuela, etc. (It'd be harder if China joined in since they are by far Russia's #1 oil customer.) But the natural gas infrastructure is insufficient for a total cut off, and new infrastructure takes too long to build.

 

[mspohr]

No, the "pull every lever" quote only applies to a partial disruption and doesn't cover winter:

"Europe may be able to cope if supply disruptions are limited to Ukraine transit. It would have to pull every lever in the energy system to keep the lights on – reducing gas burn and cranking up mothballed nuclear and coal plants; maximising indigenous gas production and pipeline imports; persuading Asian buyers to use coal and free up LNG.

“But this would only be a temporary solution to get through the summer and would leave Europe with perilously low storage volumes going into winter 2022/23 and risks demand disruptions.

The dire portion I quoted above refers to a total shutdown of Russian gas imports. You say Europe can handle that. Wood Mac very emphatically says they cannot. There is no "nuance" about it.

Oil is a different story. The US and Europe could cut off Russian oil exports. It'd require some temporary rationing and strategic reserve usage while we scramble to increase production domestically and from the middle east, Venezuela, etc. (It'd be harder if China joined in since they are by far Russia's #1 oil customer.) But the natural gas infrastructure is insufficient for a total cut off, and new infrastructure takes too long to build.

From TFA

Europe Can Survive Next Winter Without Russian Gas​

By Tsvetana Paraskova - Mar 02, 2022, 6:00 PM CST

• Russia’s invasion of Ukraine has highlighted the need for Europe to improve its energy security by reducing its reliance on Russian gas.
• According to Wood Mackenzie, European gas storage is back in the five-year range and the continent could go without Russian gas next winter.
• To survive without Russian gas in the long term, however, is a much more complex problem and one that will require improvisation.

 

[TheTalkingMule]

NOT-ADVICE and don't know if its a good idea.

BUT I see that 100 strike Jan '24 Chevron puts are selling for 6.25 with a 2.45 wide bid/ask spread (a limit order on these will matter, a lot). On the 5 year chart there has been a very short period over 130 beyond this current spike to over 160.

Almost 2 full years for the price of oil and a Chevron share to come back down.


If I were going to short the oil industry in some form or fashion it would be via max dated puts like these, not by selling shares short. And it would be via a company in the business of mining oil rather than somewhere else in the value chain. I figure the companies in the business of mining oil are the most sensitive to the price of a barrel of oil.

And it would be via a US based company, or at least via a company that trades on a US exchange with history of providing US exchange quality financials.

Chevron has other businesses beyond mining oil so not as pure of a play as I'd like. But also big enough on its own that unlikely to be bought out for some sort of M&A premium. Heck maybe they'll do the acquisition and shrink their own enterprise value!


Anybody else have idea(s) for a company to evaluate using these criteria? I picked Chevron a few years back for myself only because I'd seen a news report with the CEO saying that Chevron was going to protect the dividend no matter what. Subtext - even if we have to borrow the money to pay the dividend. That sounded then like a good mechanism to induce bankruptcy. I haven't really followed all that closely since then, but I hadn't realized the company's stock was up this far the last few months.

CVX looks to be crossing $170 today. I'm always I tested in reasonably priced long puts for CVX, but my concern in the big drop is that CVX is seen as a likely "last man standing" as oil & gas goes the way of coal. Is that within now and Jan2024? Who knows.

I think it may be easier to buy puts on more leveraged players like OXY or the field services plays. Haven't done any research, but that's my general idea.

After TSLA recovers post-1Q, my plan is definitely to funnel at least some cash into CVX and XOM puts. I've already been slowly buying, but had to pause after getting punched in the TSLA BPS nuts in January. Hoping to jump back in before this spike returns to Earth.

 

[mspohr]

A 10-Point Plan to Reduce the European Union’s Reliance on Russian Natural Gas – Analysis - IEA

A 10-Point Plan to Reduce the European Union’s Reliance on Russian Natural Gas - Analysis and key findings. A report by the International Energy Agency.

www.iea.org

Measures implemented this year could bring down gas imports from Russia by over one-third, with additional temporary options to deepen these cuts to well over half while still lowering emissions.

The analysis highlights some trade-offs. Accelerating investment in clean and efficient technologies is at the heart of the solution, but even very rapid deployment will take time to make a major dent in demand for imported gas. The faster EU policy makers seek to move away from Russian gas supplies, the greater the potential implications in terms of economic costs and/or near-term emissions. Circumstances also vary widely across the EU, depending on geography and supply arrangements.

 

[adiggs]

CVX looks to be crossing $170 today. I'm always I tested in reasonably priced long puts for CVX, but my concern in the big drop is that CVX is seen as a likely "last man standing" as oil & gas goes the way of coal. Is that within now and Jan2024? Who knows.

I think it may be easier to buy puts on more leveraged players like OXY or the field services plays. Haven't done any research, but that's my general idea.

After TSLA recovers post-1Q, my plan is definitely to funnel at least some cash into CVX and XOM puts. I've already been slowly buying, but had to pause after getting punched in the TSLA BPS nuts in January. Hoping to jump back in before this spike returns to Earth.

I tend to think that the more leveraged and the less capital discipline, the better for my purpose. A company with a big dividend, a commitment to maintaining it, while still borrowing money...

I'm also looking specifically at the oil mining exposure rather than 2rd or 3rd order affects (such as the oil field services businesses). I suppose that a company share price is already a 2nd order affect from the price of a barrel of oil, but I know that I don't want to directly interact with the price of oil (such as via SCO).

I'll look into OXY and XOM as well. Thanks for the ideas.

 

[Doggydogworld]

From TFA

Europe Can Survive Next Winter Without Russian Gas​

By Tsvetana Paraskova - Mar 02, 2022, 6:00 PM CST

• Russia’s invasion of Ukraine has highlighted the need for Europe to improve its energy security by reducing its reliance on Russian gas.
• According to Wood Mackenzie, European gas storage is back in the five-year range and the continent could go without Russian gas next winter.
• To survive without Russian gas in the long term, however, is a much more complex problem and one that will require improvisation.

This is the same article from the same author misquoting the same Wood Mackenzie study. I linked to and quoted extensively from that same Wood Mac release. You can believe what you want, but stop claiming Wood Mac agrees with you when they very clear said the exact opposite.

 

[mspohr]

This is the same article from the same author misquoting the same Wood Mackenzie study. I linked to and quoted extensively from that same Wood Mac release. You can believe what you want, but stop claiming Wood Mac agrees with you when they very clear said the exact opposite.

I don' know why this has triggered you so much.
I'm just providing information from the articles and providing links to the articles.
I clearly know less than these people. I'm just providing links to what others have said. It's fine for you to disagree with them.
It's clearly a complex subject with lots of moving parts and I don't think anyone knows what is going to happen.
My only "opinion" in this discussion is that I think that this should be a wake up call to the world to move away from oil and gas as rapidly as possible and that governments have a role to play with laws, regulations and finance. We really should be on a war footing. We have let the "free market" and the oil and gas monopolists run the show for too long and the result is that we have destroyed the environment and have now generated another oil war. This is a failure of capitalism and it's time for governments to step in.

 

[TheTalkingMule]

We have let the "free market" and the oil and gas monopolists run the show for too long and the result is that we have destroyed the environment and have now generated another oil war.

So to be clear, now that renewables + storage are far and away the best and most efficient solution......you want to abandon the free market as a tool to quickly deploy energy technologies?

This is a failure of capitalism and it's time for governments to step in.

I have a life-sized cardboard cutout of Barack Obama in my house, and this quote made me physically nauseous.

Germany's 1/4 the size of the US free market installed more solar in December of 2011 than the US has in any month to date. All the govt did was set the payback rate and give renewables grid priority. The market did literally 99.9% of the work.

You seem to take every thread to climate change and anticapitalism. The rest of us would prefer to stick to the topic. This is the oil shorting/deathwatch thread!

 

[Spacemanspliff]

The article is a lot more detailed and nuanced than the quote you pulled out of context.
It would require an extreme effort. That's why it would be good to have the US help.

Dude, his point is you linked an article whose title is literally "Europe can survive next winter without Russian Gas" and then goes on to link a Mackenzie article as its source, WITHIN that source article it literally says "She added: “If all Russian gas is cut off, Europe would have no chance of coping."

 

[Spacemanspliff]

So to be clear, now that renewables + storage are far and away the best and most efficient solution......you want to abandon the free market as a tool to quickly deploy energy technologies?

Again, anything without nuclear is a folly. There is literally no way we ramp up mineral extraction for solar, storage, and EVs to facilitate a functioning grid and that is just looking at the US.


Secondly polysilicon is a limiting factor with solar, there are only 3 companies in the US that manufacture polysilicon. Unless you want to let our energy chain yet again be reliant on a country we are unfriendly with in China who will create all these panels via coal power and questionable labor practices.

This doesn't discuss the amount of space needed, the waste cycle, polysilicon prices exploding, etc.

 

[TheTalkingMule]

I didn't post anything about European gas, because this is the oil thread.

I'm all for utilizing existing nuclear while we ramp renewables, but have zero interest in waiting 10yrs and spending 5x renewables+storage for new nuclear.

We also were about to run out of silicon for solar panels in 2010. Things worked out ok. Materials are not a concern for wind/solar+storage.

But I'd rather not discuss it here, because this is the oil thread.

 

[mspohr]

Dude, his point is you linked an article whose title is literally "Europe can survive next winter without Russian Gas" and then goes on to link a Mackenzie article as its source, WITHIN that source article it literally says "She added: “If all Russian gas is cut off, Europe would have no chance of coping."

I'm sorry you have to look at this in black and white. There was a lot of discussion in the article of various scenarios. Under some of those scenarios, Europe could survive without Russian gas. Others, not so much.

 

[Spacemanspliff]

I didn't post anything about European gas, because this is the oil thread.

I'm all for utilizing existing nuclear while we ramp renewables, but have zero interest in waiting 10yrs and spending 5x renewables+storage for new nuclear.

We also were about to run out of silicon for solar panels in 2010. Things worked out ok. Materials are not a concern for wind/solar+storage.

But I'd rather not discuss it here, because this is the oil thread.

It would take you the same time frame to ramp the necessary materials required to overbuild a solar base grid + storage compared to nuclear, without the negative of it being an intermittent power source. I stated nothing about running out of silicon, more the fact that its all mostly produced in china, a nation we are not on good terms with and done so using coal and questionable labor practices.

Materials are a concern for wind/solar+storage and evs.

 

[mspohr]

Again, anything without nuclear is a folly. There is literally no way we ramp up mineral extraction for solar, storage, and EVs to facilitate a functioning grid and that is just looking at the US.


Secondly polysilicon is a limiting factor with solar, there are only 3 companies in the US that manufacture polysilicon. Unless you want to let our energy chain yet again be reliant on a country we are unfriendly with in China who will create all these panels via coal power and questionable labor practices.

This doesn't discuss the amount of space needed, the waste cycle, polysilicon prices exploding, etc.

There is literally no way we can build nuclear to provide meaningful power in less than 10 years. By then, it will be too late.

 

[Spacemanspliff]

There is literally no way we can build nuclear to provide meaningful power in less than 10 years. By then, it will be too late.

lol it wont be too late, will it not be ideal? Sure, but it wont be too late. If you think we can build a grid purely in solar, wind and storage given our current state of mining in 10 years you are going to be disappointed. This also doesn't include every other nation on this earth, there is a reason why China is building out a ton of nuclear power over the next 15 years.

 

[mspohr]

Germany's 1/4 the size of the US free market installed more solar in December of 2011 than the US has in any month to date. All the govt did was set the payback rate and give renewables grid priority.

This is not the free market. This is the government setting regulations and finance which is what we need to do.

 

[mspohr]

lol it wont be too late, will it not be ideal? Sure, but it wont be too late. If you think we can build a grid purely in solar, wind and storage given our current state of mining in 10 years you are going to be disappointed. This also doesn't include every other nation on this earth, there is a reason why China is building out a ton of nuclear power over the next 15 years.

We can build out wind, solar and storage to cover all of our energy needs in less than ten years and it will give us much lower energy cost than nuclear, coal, NG, fossils without the environmentally destructive pollution.
Of course, this would require a large mobilization of investment and the incumbent fossils will oppose it with all of their economic and political power.

A few references:

Study: wind and solar can power most of the United States | John Abraham

John Abraham: Wind, solar, and storage could meet 90–100% of America’s electricity needs

www.theguardian.com

Geophysical constraints on the reliability of solar and wind power in the United States

We analyze 36 years of global, hourly weather data (1980–2015) to quantify the covariability of solar and wind resources as a function of time and location, over multi-decadal time scales and up to continental length scales. Assuming minimal excess generation, lossless transmission, and no other...

pubs.rsc.org

You’ve requested a page that no longer exists | Stanford News

news.stanford.edu

 

[adiggs]

There is an important difference between new build nuclear and new build solar/wind as well. The new build solar / wind will come online in dribs and drabs as individual projects get completed, and will therefore begin contributing almost immediately from when the projects begin.

Nuclear projects are significantly longer duration. Clearly there won't be a single nuclear project / build that takes 10 years to come online, but it'll still be a lot longer before the first new build nuclear is online and contributing to the shift from fossil fuels.

 

[TheTalkingMule]

This is not the free market. This is the government setting regulations and finance which is what we need to do.

Germany is about 80x more capitalist than the US right now. Especially when it comes to energy markets and energy companies.

Yes, their government set the regulatory framework to scale renewables globally, but the extent of their govt effort was the equivalent of one sheet of paper.

I have to image the government intervention ideas you have in your head are far more along the lines of government managing the actual execution of the transition. That would go.....poorly.

Renewables plus storage are the most robust, cheapest, and easiest sources of energy to scale. That's why the global marketplace is adding wind/solar/storage almost exclusively when the option is available.

We need to focus on making sure our markets function with less corruption and that's it. Watch what Germany does over the next 6-8 years. Wouldn't surprise me at all if they've mostly completed their 2035 plan by 2030. That's precisely how the first phase went.

 

[TheTalkingMule]

WTI crude is down 12% today as I assume Putin is in meaningful peace talks. Maybe their stock exchange will open tomorrow and not implode.

Weekly EIA US crude report showed essentially flat supply/demand yet again. Imports were down for at least the 2nd week in a row, crude/products total supply only dropped by an amount equal to the change in import volume.

There is no real crude oil shortage and demand has not recovered from the pandemic. Nor is it likely to.

Now that covid has dropped to nearly zero in the US, and all the US frackers have sold tons of crude futures contracts, how huge do you think our oversupply will be around Memorial Day? I'm calling another <$0 WTI day before July 4th.