Shorting Oil, Hedging Tesla

[renim]

but when mid-day supply hits 250% of demand it makes sense.

No , H2 fuel cells never make sense for electricity.
There are chemical uses for hydrogen, that is why such a large methane/coal to hydrogen already exists, but hydrogen fuel cells are simply stupid.

Consider this, each step in the H2 via electrolysis is about 60% efficient, so thats .6 x .6 = 36% efficient.
VS a Flow battery like Zinc Bromide is about 60% efficient round trip, costs less per kWh, and costs less per kW, and is intrinsically safer.

There is no stationary application where electricity stored via H2 fuel cell via electrolysis has a possible successful outcome. None at all.

Due to limited roof space, people will still need utilities, for distribution and billing and (gasp) power. Even if they net electricity exporters. Grid defection can become quite attractive, but that requires a small generator somewhere.....

 

[adiggs]

No , H2 fuel cells never make sense for electricity.
There are chemical uses for hydrogen, that is why such a large methane/coal to hydrogen already exists, but hydrogen fuel cells are simply stupid.

Consider this, each step in the H2 via electrolysis is about 60% efficient, so thats .6 x .6 = 36% efficient.
VS a Flow battery like Zinc Bromide is about 60% efficient round trip, costs less per kWh, and costs less per kW, and is intrinsically safer.

There is no stationary application where electricity stored via H2 fuel cell via electrolysis has a possible successful outcome. None at all.

Due to limited roof space, people will still need utilities, for distribution and billing and (gasp) power. Even if they net electricity exporters. Grid defection can become quite attractive, but that requires a small generator somewhere.....

I was mostly being sarcastic about using hydrogen for seasonal energy storage, and partly being silly in a manner intended to create possibility thinking. In a world we don't yet live in, where we have so much surplus energy during times of the day, we'll find a way to store or use that energy for the times when we don't have a huge surplus.

Maybe we'll heat salt until it's molten (I've seen that somewhere), though how we'll insulate it in the fall, so it's still hot in the winter ...

Anyway - please see this as my plea to let the hydrogen thing go. I agree that it's silly in today's context, it'll be silly for a long time to come, and there's a good chance it will always be silly (and I hedge the final comment only because I'm more Bayesian than not, and the math does bad things when you decide something is definite - in any direction).

 

[jhm]

Oil Rally Hopes Crushed As Inventories Hit All-Time High | OilPrice.com

Oil continues it's march south of $45. It seems somebody's starting to not that total petroleum stock has been climbing all along as crude stock dipped slightly.

The engine is flooded with gasoline. Actual consumer demand for petro products sucks.

Soon we'll hear worries about a recession.

 

[renim]

or the oil price is just reflective of other bulk mineral commodities
Chart Builder | Charts & DataMine

correlation or causation?

 

[jhm]

or the oil price is just reflective of other bulk mineral commodities
Chart Builder | Charts & DataMine

correlation or causation?

What story do you want to tell about that?Everything in the economy is linked, so what's special about the relationship between oil and iron ore?

 

[Bangor Bob]

Oil Rally Hopes Crushed As Inventories Hit All-Time High | OilPrice.com

Oil continues it's march south of $45. It seems somebody's starting to not that total petroleum stock has been climbing all along as crude stock dipped slightly.

The engine is flooded with gasoline. Actual consumer demand for petro products sucks.

Soon we'll hear worries about a recession.

Green Car Congress: US petroleum demand up in June 2.8% year-on-year; highest June deliveries in 9 years

API says June deliveries of product were up 2.8% vs. last June. There is robust demand for CUV's and Pickup trucks, and they are thirsty.

If Trump is truly concerned about an $800B trade deficit, he should back electric cars. Oil imports at 9.8mbpd and $45/bbl represents ~ $161B of the total. (Yeah, not holding my breath on that one...)

 

[neroden]

Hmm. So there's rising oil demand in the US, but there's an oil glut. I'm going to guess falling demand elsewhere -- probably China. If they've stopped filling up their petroleum reserve that would remove some demand.

 

[dc_h]

Green Car Congress: US petroleum demand up in June 2.8% year-on-year; highest June deliveries in 9 years

API says June deliveries of product were up 2.8% vs. last June. There is robust demand for CUV's and Pickup trucks, and they are thirsty.

If Trump is truly concerned about an $800B trade deficit, he should back electric cars. Oil imports at 9.8mbpd and $45/bbl represents ~ $161B of the total. (Yeah, not holding my breath on that one...)

Harold Hamm energy secretary. Does that answer your question?

 

[jhm]

I'm starting to get excited about the Tesla Semi business. There is tremendous potential to displace deisel consumption with electric trucks. So let's do some math.

Firstly, my working scenario assumes that it takes about 25 EV auto to offset 1 b/d of gasoline consumption. Put another way, this is 0.04 b/d per EV auto. A range of assumption can get you there is you play with daily mileage and mpg. For example, for a single EV auto.

37.8 mile/day ÷ 22.5 mpg ÷ 42 gal/b = 0.04 b/d

Now, let's do this for a Semi. I'm going to make up a bunch of numbers, so if anyone can find better numbers for me let me know. I'd love to tighten this up. So I've read that semis get about 6 mpg average. That's a nice round number. The tough question is how many miles per day would a semi be used. I'm thinking tha 10 hour per shift at about 50 miles per average, 500 mile/shift. But how many shifts in a year? Maybe 250 per year, unless there are multiple drivers or autonomous driving which could push upto 720 shifts per year. So I'll keep this low, say 250 shifts per yer, 125,000 miles/year. 340 miles/day per semi is a nice round number. Thus we arive at:

340 mi/d ÷ 6 mpg ÷ 42 gal/b = 1.35 b/d per EV semi

Note that an autonomous electric semi could double this.

Roughly 750k electric semis are need led to displace 1 mb/d of deisel consumption, or 340k autonomous electric semis.

So with this in mind, I am eager to learn what Tesla has in mind for its Semi business.


Addendum
An average trucker earns $0.303/mile and $32k per year. This works out to 289 miles per calendar day per trucker. Tractors can be driven by more than one driver so 350 miles/day per tractor does not seem too far off. Note also that $32k/yr gives us a basis for valuing autonomous driving technology.

 

[valkeriefire]

Autonomous semi-trucks would be awesome, but I'll settle for just electric ones. Given the complex details of backing up trucks, I don't think any truck drivers will be out of a job in the next decade. Also, truck drivers do fairly well, I was thinking they make about 2x your $32k figure, but I underestimated it also. It is a hard job, long hours away from home, which drives up the cost of labor. Per CNN they make around $72k, I've heard of them making over $100k. Local delivery drivers make less, but they still earn around $60k as most companies pay their drivers a tiny percentage of what they deliver.

 

[jhm]

Autonomous semi-trucks would be awesome, but I'll settle for just electric ones. Given the complex details of backing up trucks, I don't think any truck drivers will be out of a job in the next decade. Also, truck drivers do fairly well, I was thinking they make about 2x your $32k figure, but I underestimated it also. It is a hard job, long hours away from home, which drives up the cost of labor. Per CNN they make around $72k, I've heard of them making over $100k. Local delivery drivers make less, but they still earn around $60k as most companies pay their drivers a tiny percentage of what they deliver.

Thanks. I was looking at this link, Trucking Statistics - Truckinfo.net, but this page generally seems out of date. So probably not so reliable.

So from the CNN report, there has been a shortage of drivers in recent years. If this continues to be the case, then it looks good for autonomous trucks. They can fill the most tedious jobs without displacing drivers.

 

[TNEVol]

Driver expenses especially Workers Comp and liability insurance are extremely important to carriers. Careless, sleepy, drunk, addicted etc drivers and their salaries are the bane of trucking companies. Give them an opportunity to put an autonomous truck on the interstate that will drive safely and they will jump for it. Autonomous, plus electric and remote operation ala drone and at least cross country interstate driving is covered. As I remember labor and associated cost are the biggest factor.

 

[neroden]

I'd love to tighten this up. So I've read that semis get about 6 mpg average. That's a nice round number. The tough question is how many miles per day would a semi be used. I'm thinking tha 10 hour per shift at about 50 miles per average, 500 mile/shift. But how many shifts in a year?

Short-haul trucking does "between 200 and 500 miles per day", according to something I found. It's probably on the lower end of the mpg average, since it's a really bad duty cycle for a diesel engine. Long-haul trucking will be more efficient. Short-haul trucks do, however, operate pretty much daily -- call it 5 days a week or 250 days a year.

Maybe 250 per year, unless there are multiple drivers or autonomous driving which could push upto 720 shifts per year. So I'll keep this low, say 250 shifts per yer, 125,000 miles/year. 340 miles/day per semi is a nice round number.

Seems fair enough! I'd expect it to be a bit higher.

Thus we arive at:

340 mi/d ÷ 6 mpg ÷ 42 gal/b = 1.35 b/d per EV semi

Note that an autonomous electric semi could double this.

I have serious doubts that short-haul will be able to go fully driverless for a funny reason: the driver typically loads and unloads the truck. That's not gonna be automated any time soon, and the parking is even a serious problem (....given that they often have to illegally double-park due to cars illegally parked in loading zones.... I don't think the carmakers want to automate illegal activity and they'd rather leave that on the truck drivers) .

Every truck fleet owner would love to have the trucks autonomous on the highway. I don't see any way in which it changes the oil usage, however. Trucks are dispatched quite efficiently now.

Roughly 750k electric semis are needed to displace 1 mb/d of diesel consumption.

There are only roughly 2 million tractor-trailers in the US. Maybe half of them are short-haul (that's a wild ass guess). So that gives you a limit on how much you can displace.

 

[Bangor Bob]

Harold Hamm energy secretary. Does that answer your question?

Fortunately, even if Trump wins I doubt they can tilt the economics in favor of increased oil consumption over the long term - unconventional oil producers are setting a floor on the price by not finishing wells when prices are too low, and electric substitution sets an ever-dropping ceiling worldwide. Oil already gets so much favorable treatment that it's hard to imagine what other financial support the industry could get short of direct subsidies, which would require some impressive policy gymnastics for Republicans to support.

 

[jhm]

The oil market is continuing to have a melt down, $42.7/b this morning. Sub 40 seems likely.

 

[Erleichda]

Fortunately, even if Trump wins I doubt they can tilt the economics in favor of increased oil consumption over the long term - unconventional oil producers are setting a floor on the price by not finishing wells when prices are too low, and electric substitution sets an ever-dropping ceiling worldwide. Oil already gets so much favorable treatment that it's hard to imagine what other financial support the industry could get short of direct subsidies, which would require some impressive policy gymnastics for Republicans to support.

I sense that the market benefits the most from disruptions to production. If they want to squeeze profits before demand starts to dry up I can very much see an engineered disruption to production. My only question is where and how. Clearly they would like the US to ramp back up. Would this mean the ME? Doubtful it means Russia/Venezuala. Definitely not Canada or EU. Engineering a war is exactly the kind of thing I see happening. Syria? All it takes is one properly executed terrorist attack.

 

[dc_h]

I sense that the market benefits the most from disruptions to production. If they want to squeeze profits before demand starts to dry up I can very much see an engineered disruption to production. My only question is where and how. Clearly they would like the US to ramp back up. Would this mean the ME? Doubtful it means Russia/Venezuala. Definitely not Canada or EU. Engineering a war is exactly the kind of thing I see happening. Syria? All it takes is one properly executed terrorist attack.

With oil below $40 a barrel, I don't think war or other supply disruptions need to be engineered. Economic disruption and fear will affect decision making. Assuming US oil producers were aggressive hedgers at $50, the US should stay stable at current production for the next 12-18 months. That will put more pressure on high price dependent producers. Nigeria and Venezuela seem like the highest short term risks. Eventually some of these producers will go through political and financial restructuring and likely re-enter the market as smaller producers. Looking at geopolitical and financial risk by country, you can probably develop pretty good estimations of which producers will exit the market first.
I see general macro studies on the impact of lower oil prices, but didn't see any studies on a country by country risk matrix analysis. Long term price declines are likely going to have events that will drive prices backup in the short and medium term. Major producers or supplies will go offline and cause a short term bump up, like we had this spring. Having some predictive analysis of this process would help understand pricing floors and ceiling.

 

[jhm]

Low Oil Prices Kill Off 7 Billion Barrels Of Oil Production | OilPrice.com

Wood Mackenzie is expecting that the low levels of investment in 2016-17 will lead to a 7 mb/d decline in production by 2020. Thus, low oil prices are shrinking the longer-term supply.

This is exactly what peak oil demand looks like. It not so much about the number of barrels consumed, but about the total revenue from sales of crude. As that total revenue declines, investment in sustaining and growing supply declines, leading inexorably to lower production.

So the remaining question is whether demand is strong enough that, as supply declines, the price of oil rises high enough to reverse the decline. And that price to sustain supply is well above $50/b, probably north of $70/b.

One way to kill supply is to launch technologies that are price competitive with oil at $50/b. Tesla Semi seems to have that potential. Tesla Semi can scale rapidly when the price of oil is high forcing the price of diesel to compete with the cost of solar+batteries. This puts a long-term cap on the price of diesel, and this cap can be low enough to force supply to decline.

 

[jhm]

Crude falls to $42.1/b on weekly report from EIA. Crude inventory builds 1.7 Mb, while total commercial (crude plus refined products) stock builds 2.7 Mb last week.

So the build up of refining products seems to be starting the reverse draw of crude.

From the EIA report:

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.7 million barrels from the previous week. At 521.1 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories increased by 0.5 million barrels last week, and are well above the upper limit of the average range. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories decreased by 0.8 million barrels last week but are above the upper limit of the average range for this time of year. Propane/propylene inventories rose 2.2 million barrels last week and are at the upper limit of the average range. Total commercial petroleum inventories increased by 2.7 million barrels last week.

 

[adiggs]

Why Oil Prices Might Never Recover | OilPrice.com

This is the first article I've read that talks about energy prices as a burden for the worldwide economy to bear. There are bits and pieces I might argue here and there, but the overall macro view of energy prices is - I believe - highly valuable.

An obvious takeaway from this article is to associated low oil prices with an improving economy, something I believe to actually be true, rather than the more typical financial analysis that associates low oil prices with low economic activity and a worsening economy.