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THE GAME IS ON - OPEC thinks BEVs is a pipe dream

Discussion in 'TSLA Investor Discussions' started by vgrinshpun, Nov 7, 2014.

  1. vgrinshpun

    vgrinshpun Active Member

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    This just made my day: OPEC published report declaring that BEVs are doomed.

    There are a few theories on what drives the cartel to start oil price war. While fighting for their market share might be part of it, I think that there is realization that they need to fight not for the oil market share, but for OIL MARKET itself. The fight with oil industry is not going to be easy, but it seems that we are entering the third stage: First they ignore you, then they laugh at you, then they fight you, then you win (Mahatma Gandhi)

    Ironically, the low gasoline prices will harm hybrids first, because they are a very poor compromise - the ONLY reason people buy them is to save on gasoline. The incentive to buy the hybrids disappears when gasoline is cheap.

    Saving on gasoline is NOT a primary reason for buying BEVs, hence the sales of BEVs are not taking a hit due to lower gasoline prices, while sales of hybrids are (When cheap gas affects new car sales, don’t confuse EVs with hybrids - Torque News)

    Here is the "wisdom" from the world Oil Outlook report issued by the OPEC cartel:

    Pure plug-in electric cares are unlikely to gain a significant market share in the foreseeable future
    . Apart from a high purchase price there are issues of convenience, such as range limitations and battery performance during hot and cold weather conditions (when higher output would be needed for cooling or heating the car). Vehicle electrification will likely be mostly confined to various degrees of hybridisation, including plug-ins.

    Here's OPEC's chart:
    screen_shot_2014-11-07_at_10_00_45.png


    Read more: http://www.businessinsider.com/opec-thinks-elon-musks-tesla-revolution-is-a-pipe-dream-2014-11#ixzz3IRszqwSK
     
  2. jhm

    jhm Active Member

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    So how many billions of dollars are they willing to forego just to fight a pipe dream? OPEC, I hear Tesla shorts calling. They want their FUD back.
     
  3. MarkR

    MarkR Member

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    Interesting, but do we really care what OPEC thinks? We who know better will laugh all the way to the bank . . . and the electric socket.
     
  4. jhm

    jhm Active Member

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    What better way to piss off OPEC than to buy an All American, All Electric Tesla! Seriously, if this is all it takes to get OPEC to drop crude from $100 to $75 per barrel, then every oil importing country ought to do everything it can to encourage EV sales.
     
  5. jandkw

    jandkw Member

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    Who's the OPEC oil cartel countries? Iran, Iraq, Kuwait, Saudi Arabia and Venezuela, just to name a few. This is their livelihood and what do you expect them to say? They can even project the oil demand for the next 25 years, amazing. Obviously they sent out this statement because they are seeing the EV and/or alternate fuel vehicles are becoming a threat to them. I believe US (and Canada) can become self-sufficient on crude oil with little dependency on OPEC countries.
     
  6. Johan

    Johan Took a TSLA bear test. Came back negative.

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    For anyone who didn't read jhm's post in the TSLA stock thread but who comes across this very interesting thread (thx for posting vgrishpun!), let me quote him:

    "The Saudis have to sell oil like it's going out of style, because it is."
     
  7. Curt Renz

    Curt Renz Active Member

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    #7 Curt Renz, Nov 8, 2014
    Last edited by a moderator: Mar 13, 2016
     
  8. David99

    David99 Active Member

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    Hard to predict the future, but there is no doubt that vehicles will move from using fossil fuel to electric. At what rate is actually hard to predict. It might be faster than what this charge suggests, but let's not be naive. Big oil will do anything they can to slow this down as much as they can. Big oil isn't worried about the 20k Tesla's that are sold every year or Leafs. They are worried about the mass market. They will use all their money, influence and power to prevent a massive change as long as they can. For them it's about survival. They have everything to lose, so they will fight with everything they have. They will find any legal and illegal way (that they can get away with) to sabotage, slow down, interfere with the giga factory. Putting pressure on suppliers, putting pressure on politicians. They'll find ways. They won't be sitting there and letting EVs put them out of business.
     
  9. jhm

    jhm Active Member

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    #9 jhm, Nov 8, 2014
    Last edited: Nov 8, 2014
    Let's see the Saudis produce nearly 10 million barrels per day. At $100 per barrel, that is about $360B per year. If they were deliberately pushing the price down to $75/bbl, that would cost them around $90B per year. I find it hard to fathom that they take EVs to be so great a threat that they would forego so much revenue just to slow Tesla and other EV makers. Of course, issuing propaganda against EVs is pretty cheap to deliver so I don't buy a word of what they say about EVs. For $90B the Saudis could potentially buy out Tesla (hang on to your shares), but depressing the price of oil 25% for a year or more to halt EVs does not really make sense to me. What does make sense is a lrice war aimed to shake out marginal producers like frackers in the US that need the price of oil to be above $80 to be profitable. Once the marginal have been forced to curtail, then the price will go back up to levels that support domestic spending budgets in oil producing countries. Long-term they cannot afford to produce at a deep discount, but they have much to gain by taking out marginal producers. I believe the ICE parc will peak in the early 2030s, around the time when EVs capture about half of the new car market. After that point demand for gasoline will quickly fall upto about 5% per year. I've modelled this, and the free fall is shocking. Just a few years past peak ICE fleet, demand will fall so fast that no oil producers can curtail fast enough. Assets will be stranded. So the best the Saudis can do at this point is to drive marginal producers out of the market and sell as much oil as they can over the next twenty years. I suspect that they are sitting on so much reserves that even if my peak ICE scenario is ten or twenty years to early, that they would still would not be able to pump it all out in time. So they may as well act as if the peak could come as early as 2030.

    The key thing for Tesla and other EV makers to do is to build out Gigafactories and double capacity every 24 months or faster. Additionally, when Tesla says it can grow at 50% per year for the foreseeable future, this is consistent with doubling every 20.5 months, fast enough to become OPEC's worst nightmare.

    Edit. You can see my model discussed here, Long-Term Fundamentals of Tesla Motors (TSLA) - Page 189 .
     
  10. Thora

    Thora Member

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    I think this oil price going down is a price war, nothing to do with Tesla.
     
  11. Auzie

    Auzie Tree Hugger Member

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    The main reason for oil price going down is on the supply side. There is too much oil production, thanks in part to increasing US supply. There is a simultaneous reduction in demand due to China economy slowing down.

    I would be surprised if electric cars are even a minute factor in an event like this. Maybe one day, when bev supply is matching demand, electric cars will become a factor to be reckoned with in the world of a mighty oil.
     
  12. richkae

    richkae VIN587

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    I know that the developing world is different, but:

    CNG cars have been for sale in the US for 10 years, so have hybrids.
    BEVs and PHEVs have been on sale for about 3 years ( ignoring the Roadster, starting with the Leaf and Volt )
    There are about 20x more hybrids in the US than CNG vehicles.
    Plugins long ago passed CNG vehicles in total sales.

    This year more plug in vehicles will be sold than CNG vehicles have sold since their inception.
    In 1 or 2 years, the BEV and PHEV categories will each do that on their own.

    CNG cars have failed to displace gasoline burners in the developed world, but plugins are growing very fast.
    Plugins are growing much faster than hybrids did.
     
  13. RobStark

    RobStark Active Member

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    What exactly is Big Oil going to do to stop the GF?

    Bills passed, permits passed, Tesla's investment portion raised on Wall street. Bills passed unanimously. Concrete is starting to flow. Where was the pressure?

    What can Big Oil do to Panasonic,Hitachi and Polypore?

    EVs will shrink Big Oil's addressable market by over half but not put them out of business.

    Modern agriculture is turning petroleum into calories. Plastics. Jet and Rocket fuel.

    Graphite in lithium ion batteries can also be made synthetically from petroleum.

    There are so many uses for petroleum. The dumbest thing to use this limited resource for is burning it in cars.
     
  14. J1mbo

    J1mbo Member

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    As above, the % of oil used globally for car transportation is..... very small. Even if everyone gets a BEV, there are still ships in the sea, planes in the sky, tarmac on the streets, and plastic in just about everything.
     
  15. Chickenlittle

    Chickenlittle Active Member

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    True but it's small increments in demand that move the price of oil.
     
  16. RobStark

    RobStark Active Member

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    They also move supply.

    No doubt the replacement of ICEv with BEVs equals big profit losses for OPEC and Russia but not industry collapse.

    A lot of "tight oil" and Canadian "oil sands" will be out of business. At least for a long time.

    But it also extends the time those revenues will be coming in.
     
  17. ToddRLockwood

    ToddRLockwood Active Member

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    I'd like to see a CO2 concentration chart superimposed on top of OPEC's chart, along with a chart of catastrophic weather events per year. OPEC is in complete denial about global warming. In the meantime, we have solar energy—a carbon-free source of energy with a feedstock cost of zero.

    For an alternate prediction on our energy/transportation future, check out what Elon Musk has to say about it...

    Elon Musk: The mind behind Tesla, SpaceX, SolarCity ... | Talk Video | TED.com
     
  18. jhm

    jhm Active Member

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    Gasoline and diesel are over 70% of the oil market. Wherever you see ICE, that marktet is potentially addressable by batteries. So the question is where is the lowest hanging fruit. Cars are just the beginning. What other high margin opportunities can Tesla pursue? This is the question I take up in a new battery pack thread.
     
  19. Alfred

    Alfred Member

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    Fuels for transport account worldwide for over 60% of oil products used and within those aviation and marine are of lesser importance. (Sources: IEA and US gov.). Road transport produces the majority of greenhouse gases in the transport sector and BEV's could make a major contribution to a reduction of these gases:

    chart_emissions_by_source.gif
     
  20. CalDreamin

    CalDreamin Member

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    I wouldn't describe the % of oil that goes into car transportation as very small. On a global basis, of the 152 EJ of oil products in 2011, 51 EJ went into light road vehicles (cars, pickups, SUVs, minivans, motorcycles), or 34%. It's closer to 50% in the U.S.

    If everyone had a BEV then light-duty vehicle gasoline demand would be almost entirely gone, and oil refineries cannot just turn that off. Refineries have a limited degree of flexibility to shift yields between different products.
     

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