Energy Sector

[KJP]

24 minutes ago, meiroy said:

Is Manchin going to stand up to Warren?

 

 

For better or for worse, Manchin just blocked the trillion dollar BBB on which the President of the United States campaigned and which 48 of his fellow Senators (including Warren and Sanders) backed.  I don't understand the suggestion that he would be afraid to "stand up" to any Democratic Party elected official. 

 

Maybe he ultimately would vote for a fossil fuel windfall tax, but not because of anything Senator Warren says.

[Gregmal]

Manchin is probably only one of a half dozen or so(at best) people in congress that you can trust to act in the interest of the country. 

[Gamecock-YT]

6 hours ago, nafregnum said:

I wish I knew a lot more about the oil hedging that airlines and oil producers do.  

 

About 12 months ago oil was $20 and now it's around $120. 

 

During the lows you'd hope all the airlines locked in some extremely cheap gas hedges.

 

And now oil producers are going to to lock in at these highs.

 

Is this the kind of wild volatility that ends up bankrupting the insurers (is this all done with derivatives?), or are these financiers making money hand over fist and loving every minute of it?  

 

 

I think the airlines had a lot bigger issues to deal with a year ago than buying hedges on oil with cash they didn't have. 

[Parsad]

5 hours ago, Gregmal said:

Man, someone called it. Brandons War creates higher energy prices and now its the result of corporate greed so of course we need to have Pocahontas or Bernie introduce a windfall tax.....my god these clowns are predictable. 

 

Greg and everyone else...just friggin' use Biden and Warren...or the names of the politician you are targetting.  This shit gets tiresome and just provokes others.  If you can't avoid politics, then at least use the god-damn names so that I don't have to keep dealing with flame posts!  Cheers!

[Gregmal]

1 minute ago, Parsad said:

 

Greg and everyone else...just friggin' use Biden and Warren...or the names of the politician you are targetting.  This shit gets tiresome and just provokes others.  If you can't avoid politics, then at least use the god-damn names so that I don't have to keep dealing with flame posts!  Cheers!

Fair enough. The ones complaining are probably just mad they didnt just crush this commodity rally because they were blinded by their political views. But point taken. 

[Parsad]

1 hour ago, Gregmal said:

Manchin is probably only one of a half dozen or so(at best) people in congress that you can trust to act in the interest of the country. 

 

Ok, let's not kid ourselves!  Every politician looks out for themselves and their constituents.  The big picture is never taken into account, so let's not pretend Manchin or anyone else on either side is looking out for the country!

 

Frankly, I'm not sure how either side can argue against fossil fuel security on a national/regional level.  I'm all for alternative energy, but it is clear that we need to use all sources of energy available in Canada and the U.S. to stop dependency on the likes of Russia, Saudi Arabia, Iran, Venezuela, etc.  Yes, everyone should move towards 100% green energy like Germany, but we all know there has to be a balance in how and when we get there.  Wars for fuel and sucking up to less than amiable nations is not the solution. 

 

With oil and natural gas prices where they are, I'm 100% for pushing through with pipelines between U.S. and Canada, and also to Europe.  I'm also 100% for adding surtaxes on the eventual profits to be made to offset pollution and spend on green energy...that would not only create energy security but funds to speed the process to 100% green. 

 

You have massive pools of available energy in NATO partners like U.S. and Canada...friggin' use it.  But you better bloody expect a ton of taxes on there as well!  Cheers!  

[Parsad]

7 minutes ago, Gregmal said:

Fair enough. The ones complaining are probably just mad they didnt just crush this commodity rally because they were blinded by their political views. But point taken. 

 

No one complained.  I hate it! 

 

And if I hate it, I know someone else is going to complain too.  Consider this preventive posting!

 

Thanks!

[Spekulatius]

1 hour ago, meiroy said:

Well that's not an enjoyable drop.

 

Regarding OPEC+, quite a few members can't even produce for current quota, UAE might have spare but why should other members agree?

 

COVID reopening (umm, even though there's a new wave beginning)

 

ESG obsession => less investments for years now etc.

 

Thesis still stands.

 

Even if Ukraine and Russia is resolved, the commodities macro remains.

 

Uranium just melted the f up. So at least something went right.

 

Until QE is back, I'd bet on short equity rallies and then lower lows but that's just for fun, what do I know.

 

Is Manchin going to stand up to Warren?

 

I'm wondering if I'm rationalizing it with this list.

 

Warren is just making noise. She also was complaining about expensive Thanksgiving Turkeys and a few other things and there was not windfall taxes on those either.

Edited March 10, 2022 by Spekulatius

[meiroy]

OK my bad for asking that "question", this is all so intertwined with politics it's hard to filter it sometimes.

 

 

 

 

[Gregmal]

https://seekingalpha.com/news/3811982-london-metal-exchange-rushes-to-contain-fallout-of-nickel-trading-crisis
 

this is pretty interesting. Seems every other year some fund blows up shorting some commodity or currency that gets whacky. Remember the video apology from the dude who lost every penny of client money on nat gas shorts gone bad?

 

anyhow, the less mainstream some of these are, the greater the risk you get some swan event that blows a hole in the financial system or causes some sort of contagion. It’s why IMO banks or insurers right now are a little yucky. If GME can do it so can copper or some shit. 

[lnofeisone]

@Gregmal - I caught this bit too and was trying to make sense of it. Tsingshan (the presumed org behind the short) is also a nickel producer so I think they tried to lock in prices of nickel but got a margin called because of the system set up. Definitely agree that the environment is ripe for some swan event and not every institution can afford an $8B paper loss.

[tytthus]

A similar situation happened, to a smaller dollar amount in coal.  BTU had to post $534 million to satisfy margin requirements on derivative contracts after coal surged 200%+ since the end of 2021:

 

https://finance.yahoo.com/news/peabody-announces-financing-arrangement-135400730.html

 

[Spekulatius]

3 hours ago, lnofeisone said:

@Gregmal - I caught this bit too and was trying to make sense of it. Tsingshan (the presumed org behind the short) is also a nickel producer so I think they tried to lock in prices of nickel but got a margin called because of the system set up. Definitely agree that the environment is ripe for some swan event and not every institution can afford an $8B paper loss.

BTU also got a margin call on their coal hedges. I imagine some E&P's  might blow up due to hedges  if prices really go parabolic like some think. That would be quite ironic.

 

 

[meiroy]

Indeed, some margin increases on oil futures today.

[mcliu]

https://newrepublic.com/amp/article/165658/windfall-tax-whitehouse-khanna-common-wealth

Any chance something like this passes?

[JRM]

If they can't pass gun control measures and cannabis safe banking I doubt this will pass.  Just another signaling opportunity to say "look, the republicans don't care about you."  

 

Hopefully people are smart enough to see through the bs, but I'm not optimistic.

 

Maybe we need to tax the windfall profits from JNJ, Moderna, and Pfizer.

Edited March 11, 2022 by JRM

[LC]

Or tax the windfall gains of politicians. I'm sure that will pass.

[Spekulatius]

1 hour ago, mcliu said:

https://newrepublic.com/amp/article/165658/windfall-tax-whitehouse-khanna-common-wealth

Any chance something like this passes?

[SharperDingaan]

The tax thing is unlikely to pass. O/G companies are not paying taxes, because they are both incurring big tax losses when writing down assets to comply with ESG, and carrying forward prior year losses. Every 100B of write down reducing tax owing by roughly 37B. No additional moneys other than royalties on additional production. 

 

The Biden view is longer term, the industry view short term.

Like it or not IC engines are being phased out in favor of electric, creating less demand for ongoing o/g. Restricting drilling on new lands, foot dragging on egress, etc. is just asset stripping; minimize ongoing net capex, and get as much out of the existing infrastructure now while you can - before o/g production is wound down in favor of electric generation.

 

The industry view is 1970's first oil price shock.

Get the gas pump price down! asap!!! Give us the leases, give us the financing, get out of our way, and let us drill baby, drill. Problem is that it is now 50 years later, times have changed, and a great many haven't been able to move on with the times. Lots of frustration 'cause its our last shot at the golden ring, we know exactly what we have to do, yet you will not let us do it - what the f*** is wrong with you people!!!

 

Obviously, lots of ways by which this could be played.

 

SD

   

 

 

Edited March 11, 2022 by SharperDingaan

[JRM]

48 minutes ago, SharperDingaan said:

Like it or not IC engines are being phased out in favor of electric

How quick do you think this transition occurs?  I don't think it happens quickly.  

 

Also, oil for car\small truck transportation is less than 10% of total oil consumption.  Not sure electrification is going to move the needle that much.  With that said, my next vehicle purchase will be a hybrid.

 

The IEA agrees, we haven't reached peak oil demand, and likely won't for another 15 years or so.  Even longer for natural gas.

 

Unless fusion reactors become a thing, of course.

[SharperDingaan]

It is already here.

I would suggest to you that most gas guzzlers on the road today, would already be gone were it not taking the supply chain 6-9 months to deliver a replacement hybrid car. Once Covid recovery starts to dominate, and supply chains begin to untwist, the re-sale value of those gas guzzlers drops like a brick - and hybrids don't need price 'rebates' any more.  

 

New car plants produce all electric/hybrids, very few produce new IC cars. As existing IC car plants are run down; the existing vehicle fleet will rapidly be replaced. Assuming an average 8-year new-vehicle cycle, about 4 years until most cars on the road are electric/hybrid.

 

Less demand for oil & more demand for gas to fire up the electricity generating power station. O/G reserves extend their lives as the gas/water cut typically rises at the expense of liquids/condensate; existing collection facilities transition to gas at minimum incremental cost. However, there is NO new reserve addition - you simply extend the life of what you already have. Hence the idea that the  'best' oil, is that oil which is never  produced.  Effing heretics!!!

 

Lot of implications here.

 

SD

Edited March 11, 2022 by SharperDingaan

[50centdollars]

40 minutes ago, SharperDingaan said:

It is already here.

I would suggest to you that most gas guzzlers on the road today, would already be gone were it not taking the supply chain 6-9 months to deliver a replacement hybrid car. Once Covid recovery starts to dominate, and supply chains begin to untwist, the re-sale value of those gas guzzlers drops like a brick - and hybrids don't need price 'rebates' any more.  

 

New car plants produce all electric/hybrids, very few produce new IC cars. As existing IC car plants are run down; the existing vehicle fleet will rapidly be replaced. Assuming an average 8-year new-vehicle cycle, about 4 years until most cars on the road are electric/hybrid.

 

Less demand for oil & more demand for gas to fire up the electricity generating power station. O/G reserves extend their lives as the gas/water cut typically rises at the expense of liquids/condensate; existing collection facilities transition to gas at minimum incremental cost. However, there is NO new reserve addition - you simply extend the life of what you already have. Hence the idea that the  'best' oil, is that oil which is never  produced.  Effing heretics!!!

 

Lot of implications here.

 

SD

 

We don't have enough commodities to have everyone buy an EV. The price of copper, lithium and nickel will soar if society tries to do this right now. Nor do we have enough batteries. We would need some alternative to batteries. 

[LearningMachine]

1 hour ago, SharperDingaan said:

Assuming an average 8-year new-vehicle cycle, about 4 years until most cars on the road are electric/hybrid.

 

I posted this a while back but can't find it easily now:

• #1. There are about 290 million cars in the U.S.
• #2. Total car sales are about 15 million per year
• #3. If 100% of car sales were electric today, it will take 19 years to replace those 290 million cars. 
• #4. Today, about 0.3 million car sales per year are electric
• #5. If electric sales double every two years, what year do you think electric car sales will be 15 million per year?
• #6. What year do we get if we add 19 years to the year from #5 above?  Ok, you'll have to add less than 19 because we would have already replaced a percentage of the fleet by the time we get to #5, but you get the picture. 

Edited March 11, 2022 by LearningMachine

[Kupotea]

There's also electrical grid requirements to think about. You can't just switch everyone to EVs and expect that current infrastructure can handle it.

Edited March 11, 2022 by Kupotea

[Spekulatius]

1 minute ago, LearningMachine said:

 

I posted this a while back but can't find it easily now:

• #1. There are about 290 million cars in the U.S.
• #2. Total car sales are about 15 million per year
• #3. When 100% of car sales are electric, it will take 19 years to replace those 290 million cars. 
• #4. Today, about 0.3 million car sales per year are electric
• #5. If electric sales double every two years, what year do you think electric car sales will be 15 million per year.
• #6. What year do we get if we add 19 years to the year from #5 above?

Yeah, you can't just nilly willy switch the entire car production to hybrids, much less electric cars. besides, it looks like the trend is going away from hybrids to foully electric cars. In any case, we are talking about a decade long project here to get production switched and then those vehicles produced up to that point are still going to be an average of ~13 years on the road. That takes us to ~23 years from now until we can phase out ICE engines for good.

Maybe be some "cash for stinker" program this is going to be quicker at some point down the road, but I think we are talking at least 20 years from now.