Energy Sector

[mcliu]

The fundamentals still show declining inventories. However, production has increased in the US - nearly 13mmbpd.

[Sweet]

How much are Saudis keeping off the market at the moment?

[SharperDingaan]

Break down the ending stocks by type, and compare it to the minimum SPR requirement for that grade. Total stocks are approaching low levels, and a very high proportion of it is light. The heavy oil SPR is much lower than it should be, and the level of storage at Cushing has been flashing for some time. There is a reason why everyone is pushing for completion of the TCP expansion asap; almost everything going through it will be WCS (heavy), and it will be flowing an additional 500,000+ bpd.

 

https://www.theglobeandmail.com/business/article-canadian-oil-output-to-hit-new-heights-within-two-years-report-says/

 

SD

   

Edited October 4, 2023 by SharperDingaan

[SharperDingaan]

39 minutes ago, Sweet said:

How much are Saudis keeping off the market at the moment?

 

Not enough. The reality is that Chinese demand continues to fall (relative to expectations), and to avoid an inventory build OPEC+ will need to apply matching cuts. Most of it will be from monthly OPEC+ run-rate depletion/disruption, plus the odd surprise. Russia cutting diesel exports while China sells off some of its excess is instructive.

 

The mystery is India. Does it temporarily play nice with the international community, swap some of its Russian supply for Iranian, and continue to pay in other than USD?  

 

SD

 

 

[KPO]

6 hours ago, SharperDingaan said:

Been shopping as well ...

 

Keep in mind that the more EV takes over the world, the more valuable heavy oil gets; as it cracks into the feed-stock for asphalt, etc. Cars still need to run on roads, the roads need asphalt, and we get asphalt feed-stock from the bottom-middle layers of the heavy oil crack. If you want the benefits .... you have to crack heavy oil, and the more heavy fractions you want the more you will displace light oil (primarily shale). 

 

Today; heavy oil is typically despised; publicly seen as highly polluting to get out (oil sands mining/refining), and as 'dirty oil' when burnt (higher carbon release). Yet it is also routinely extracted in quantity; with minimal pollution via cold flow, water flood, and C02 sequester techniques, often at depletion rates < 10%/yr.

 

Market miss pricing is a wonderful thing 

 

SD

  

This is 100% correct and glad you brought it up as I’ve been telling this to friends and family for years, but it’s not just asphalt. Can you paint your house, re-roof your house or provide tires for your car without fossil fuels? And that doesn’t even get into fertilizer, etc. The zero emissions revolution is largely nonsense. If we cared about the environment we would simply keep all assets such as cars, lawn movers, homes, etc. as long as possible, which no one does other than the cheap among us who are the real (accidental) environmentalists. 

 

 

[Spekulatius]

8 hours ago, KPO said:

If we cared about the environment we would simply keep all assets such as cars, lawn movers, homes, etc. as long as possible,

Isn’t that exactly what is happening ? The lifespan of cars keeps increasing as people keep them longer on the road -it’s now at 12.5 years. It has nothing to do with ESG either, just the fact that they last longer because they are build better:

 

I actually think that EV’s may not last as long and will get scrapped quicker. For once there could be battery lifetime issues and then the tech changes quicker and repairs of older EV’s will be harder so a 10 year old EV may be more difficult to keep on the road.

 

To your point, nobody proposes to keep ICE of the road, but at some point, we will have to start building new ones.

 

 

Edited October 5, 2023 by Spekulatius

[Castanza]

54 minutes ago, Spekulatius said:

Isn’t that exactly what is happening ? The lifespan of cars keeps increasing as people keep them longer on the road -it’s now at 12.5 years. It has nothing to do with ESG either, just the fact that they last longer because they are build better:

 

I actually think that EV’s may not last as long and will get scrapped quicker. For once there could be battery lifetime issues and then the tech changes quicker and repairs of older EV’s will be harder so a 10 year old EV may be more difficult to keep on the road.

 

To your point, nobody proposes to keep ICE of the road, but at some point, we will have to start building new ones.

 

 

Do you think at some point once EVs become good enough with enough options and enough infrastructure to support them at scale; we will see another “cash for clunkers” type program to push people that direction? It seems like a tandem market will be a real pain for consumers and manufacturers. But this could take a long time to play out as well. The transportation market is so complex. . 

[Spekulatius]

1 hour ago, Castanza said:

Do you think at some point once EVs become good enough with enough options and enough infrastructure to support them at scale; we will see another “cash for clunkers” type program to push people that direction? It seems like a tandem market will be a real pain for consumers and manufacturers. But this could take a long time to play out as well. The transportation market is so complex. . 

Yes, I am sure the EV's dominate sales 10 years from now. The world wide vehicle market goes in this direction (China, Europe, US). I really don't think this is in question. The developing world may take a little longer.

 

Trucks may take a little longer as well, especially commercial trucks. It will start with the last mile / LTL and then move to long distance.

[TwoCitiesCapital]

12 hours ago, KPO said:

If we cared about the environment we would simply keep all assets such as cars, lawn movers, homes, etc. as long as possible, which no one does other than the cheap among us who are the real (accidental) environmentalists. 

 

 

 

My entire life people have only focused on the "recycle" portion of "reduce, reuse, recycle".

 

My current vehicle is a 2003. I'm looking to upgrade to a 2016 sometime soon as the maintenance on the 2003 is becoming a regular headache.

 

I like the idea of re-using someone else's vehicle before "recycling" it which "reduces" my demand for new materials. All of the emissions from production and shipment are a sunk cost - only incremental pollution is from oil changes and gasoline burn. 

 

1 hour ago, Spekulatius said:

Yes, I am sure the EV's dominate sales 10 years from now. The world wide vehicle market goes in this direction (China, Europe, US). I really don't think this is in question. The developing world may take a little longer.

 

Trucks may take a little longer as well, especially commercial trucks. It will start with the last mile / LTL and then move to long distance.

 

I'm not so sure. I think hybrids are likely to be the clear winner in the next decade given the continued lack of investment in grid technology, base load generation, and the metals needed to make large battery packs. 

 

Hybrids bring a massive immediate reduction to emissions, do not require the massive scale of investment to make them work, and are required fewer of the scarce resources that we're limited on to achieve those results. 

 

Electric vehicles likely WILL be the future. I just think it's far more distant than 10-years. 

[Spekulatius]

1 hour ago, TwoCitiesCapital said:

 

My entire life people have only focused on the "recycle" portion of "reduce, reuse, recycle".

 

My current vehicle is a 2003. I'm looking to upgrade to a 2016 sometime soon as the maintenance on the 2003 is becoming a regular headache.

 

I like the idea of re-using someone else's vehicle before "recycling" it which "reduces" my demand for new materials. All of the emissions from production and shipment are a sunk cost - only incremental pollution is from oil changes and gasoline burn. 

 

 

I'm not so sure. I think hybrids are likely to be the clear winner in the next decade given the continued lack of investment in grid technology, base load generation, and the metals needed to make large battery packs. 

 

Hybrids bring a massive immediate reduction to emissions, do not require the massive scale of investment to make them work, and are required fewer of the scarce resources that we're limited on to achieve those results. 

 

Electric vehicles likely WILL be the future. I just think it's far more distant than 10-years. 

I like Hybrids too, but you are looking only at a ~20% improvement in fuel efficiency with current models compared to ICE. I guess emissions scale with fuel efficiency (Co2 for sure).

 

Compare for example the

Honda CRV - ICE 28/34 MPG

Honda CRV hybrid 43/36 MPG.

 

Pretty good improvement for City driving but very little for HWY driving.

 

 

[TwoCitiesCapital]

36 minutes ago, Spekulatius said:

I like Hybrids too, but you are looking only at a ~20% improvement in fuel efficiency with current models compared to ICE. I guess emissions scale with fuel efficiency (Co2 for sure).

 

Compare for example the

Honda CRV - ICE 28/34 MPG

Honda CRV hybrid 43/36 MPG.

 

Pretty good improvement for City driving but very little for HWY driving.

 

 

 

Most miles driven by consumers are city miles though. Hybrid is the low hanging fruit to make deep cuts in emissions without huge upfront costs and could literally be done in the next few years if we had government policy supporting the trade-in of ICE for hybrid. 

 

A 20% reduction in emissions from driving in 10-years is HUGE and can be done cheaply. 

 

I am willing to cede electric MAY take over long haul trucking first - but I'm still skeptical here given the massively increased requirements for performance. 

 

And without changing how our electricity is produced? EVs don't make a huge improvement to ICE. We need nuclear power plants to replace coal/gas if we want the full benefits of EVs. Otherwise you're burning 2-3x as much coal/gas is necessary just to lose a ton of energy in transit while you charge the EV with dirty energy - the end result isn't significantly better than ICE engines. Certainly not better than hybrids. 

 

Edited October 5, 2023 by TwoCitiesCapital

[Gamecock-YT]

Something I've been trying to work through is the game theory of OPEC+ supply cuts in an election year. If you are Putin, a Trump win next November is a game changer for Ukraine. What's a good way to influence that? Punitive oil prices. I know congress tried to constrain Biden from tapping the SPR but in an election year all bets are off with trying anything to keep oil prices low. From my perspective it's clear as day we're going to have a supply crunch at some point but trying to come up with what the tipping point is where my mind has been the last couple of weeks.

 

Then again figuring out where to put your exposure is another animal. The Canadian patch looks from my perspective to be best given the constraints being lifted but these management teams seem to leave a lot to be desired. I guess could always just go passthrough and have royalty exposure through PrairieSky?

 

Anybody have any thoughts? 

[rkbabang]

3 hours ago, TwoCitiesCapital said:

 

Most miles driven by consumers are city miles though. Hybrid is the low hanging fruit to make deep cuts in emissions without huge upfront costs and could literally be done in the next few years if we had government policy supporting the trade-in of ICE for hybrid. 

 

A 20% reduction in emissions from driving in 10-years is HUGE and can be done cheaply. 

 

I am willing to cede electric MAY take over long haul trucking first - but I'm still skeptical here given the massively increased requirements for performance. 

 

And without changing how our electricity is produced? EVs don't make a huge improvement to ICE. We need nuclear power plants to replace coal/gas if we want the full benefits of EVs. Otherwise you're burning 2-3x as much coal/gas is necessary just to lose a ton of energy in transit while you charge the EV with dirty energy - the end result isn't significantly better than ICE engines. Certainly not better than hybrids. 

 

Exactly.  Looking only at the fuel savings at the vehicle use level is a mistake.  People think solar panels, windmills, and batteries just appear out of the ether with no environmental impact whatsoever and that they can supply the grid entirely. Neither is even close to the truth.  We need a ton of new nuclear plants all over the country and all over the world if we are to have a hope in hell of running all of our transportation on electricity without a worse environmental impact than the status quo. Not to mention heating of homes/buildings and cooking.  I really think the aim of the WEF/environmentalist types is to make transportation so expensive that people just move around less over all. Just about every policy they want and every issue they push is to reduce human population and/or make everyone’s lives worse. Everyone will own nothing and like it.  All cars will be EVs, but we will suffer from frequent rolling blackouts and still have polluted air. 

[Castanza]

1 hour ago, rkbabang said:

Exactly.  Looking only at the fuel savings at the vehicle use level is a mistake.  People think solar panels, windmills, and batteries just appear out of the ether with no environmental impact whatsoever and that they can supply the grid entirely. Neither is even close to the truth.  We need a ton of new nuclear plants all over the country and all over the world if we are to have a hope in hell of running all of our transportation on electricity without a worse environmental impact than the status quo. Not to mention heating of homes/buildings and cooking.  I really think the aim of the WEF/environmentalist types is to make transportation so expensive that people just move around less over all. Just about every policy they want and every issue they push is to reduce human population and/or make everyone’s lives worse. Everyone will own nothing and like it.  All cars will be EVs, but we will suffer from frequent rolling blackouts and still have polluted air. 

I mean the UN laid it out over a decade ago in their Agenda 21. It amazes me how few people look at this stuff. WEF wants the same thing. 
 

CBDC - monitor and control spending

 

Move everyone into tight little urban centers with 15min walking cities. 
 

Nobody will own anything and it will all be regulated and controlled from the top down. 
 

It’s not a matter of IF but WHEN imo. What you choose to do with the info is up to the individual. I mean it’s a theme all throughout history. But we have the technology now to actually try to pull this off at scale. Might not be for another 50-75 years but usually things happen slowly then suddenly. I mean the elites are literally telling you what they are going to do and people just ignore it lol 

 

 

[Spekulatius]

@Castanza I am not stating what I think should happen, but what I think will happen. By 2035, you probably won’t be able to buy an ICE car any more in Europe or the US. You can tell by the tech roadmaps of the automobile companies which for the most part have stopped development of ICE car engines for example (except minor tweaks). Europe pretty much enacted legislation to this goal as well. It’s not going to take 50 years until ICE engines are phased out for sure.

[james22]

1 hour ago, Castanza said:

I mean the elites are literally telling you what they are going to do and people just ignore it lol 

 

The elites ignore what the people tell them as well (Molṑn Labé).

[Castanza]

3 minutes ago, Spekulatius said:

@Castanza I am not stating what I think should happen, but what I think will happen. By 2035, you probably won’t be able to buy an ICE car any more in Europe or the US. You can tell by the tech roadmaps of the automobile companies which for the most part have stopped development of ICE car engines for example (except minor tweaks). Europe pretty much enacted legislation to this goal as well. It’s not going to take 50 years until ICE engines are phased out for sure.

Yeah I agree I think there will begin to be a massive push from the top down to get this switch made. You can already see it in the manufacturing. 
 

Will be interesting to see what types of business opportunities pop up in the EV repair industry. It’s going to be a bumpy road imo. 

[UK]

https://www.wsj.com/world/middle-east/saudi-arabia-israel-talks-riyadh-oil-increase-a25d6106?mod=hp_lead_pos3

 

Saudi Arabia has told the White House it would be willing to boost oil production early next year if crude prices are high—a move aimed at winning goodwill in Congress for a deal in which the kingdom would recognize Israel and in return get a defense pact with Washington, Saudi and U.S. officials said. That understanding is part of an effort to seal a three-way agreement that would also likely include U.S. nuclear assistance and represents a notable shift by Riyadh, which a year ago rebuffed a Biden administration request to help lower oil prices and fight inflation, severely straining relations.

 

Edited October 7, 2023 by UK

[Viking]

On 10/5/2023 at 4:55 PM, Castanza said:

Yeah I agree I think there will begin to be a massive push from the top down to get this switch made. You can already see it in the manufacturing. 
 

Will be interesting to see what types of business opportunities pop up in the EV repair industry. It’s going to be a bumpy road imo. 

My uneducated guess is the transition will take much, much longer than everyone expects. From everything i read there is simply not enough raw materials to go around. There are important bottlenecks that people are not yet thinking about (like China). And current government policy is being driven by… political objectives… and not based on what actually needs to be done. This of course means we are wasting time.
 

We will get there. But the process will likely be one step back and then one step forward and then one step back… My guess is it will be painfully slow. 
 

Unless governments start up the printing presses and throw even more money at the transition. Possible. Which of course, will keep inflation high. Which will keep interest rates high. 
 

Bottom line, i am optimistic. But expectations on timing are running way too hot… in my humble opinion. 

Edited October 7, 2023 by Viking

[Gamecock-YT]

5 hours ago, UK said:

https://www.wsj.com/world/middle-east/saudi-arabia-israel-talks-riyadh-oil-increase-a25d6106?mod=hp_lead_pos3

 

Saudi Arabia has told the White House it would be willing to boost oil production early next year if crude prices are high—a move aimed at winning goodwill in Congress for a deal in which the kingdom would recognize Israel and in return get a defense pact with Washington, Saudi and U.S. officials said. That understanding is part of an effort to seal a three-way agreement that would also likely include U.S. nuclear assistance and represents a notable shift by Riyadh, which a year ago rebuffed a Biden administration request to help lower oil prices and fight inflation, severely straining relations.

 

 

might be out the window with the israel news this morning

[UK]

14 minutes ago, Gamecock-YT said:

 

might be out the window with the israel news this morning

 

Gee...you never know.

[Castanza]

2 hours ago, Viking said:

My uneducated guess is the transition will take much, much longer than everyone expects. From everything i read there is simply not enough raw materials to go around. There are important bottlenecks that people are not yet thinking about (like China). And current government policy is being driven by… political objectives… and not based on what actually needs to be done. This of course means we are wasting time.
 

We will get there. But the process will likely be one step back and then one step forward and then one step back… My guess is it will be painfully slow. 
 

Unless governments start up the printing presses and throw even more money at the transition. Possible. Which of course, will keep inflation high. Which will keep interest rates high. 
 

Bottom line, i am optimistic. But expectations on timing are running way too hot… in my humble opinion. 

All very true…there is no shortage of bottlenecks out there for the transition. Probably will be pockets of development sustained by govts (country, or state level) intervention. Governments don’t often take the most logical or rational approach to changes. Throw in a some economic disaster in key development or adoption locations and it throws a whole monkey wrench into the change over. Then you have all the competing markets of consumer electronics, other renewables etc. 

[UK]

https://www.wsj.com/business/energy-oil/the-oil-patch-is-primed-for-an-era-of-megadeals-3d775398?mod=hp_lead_pos4

[Spekulatius]

If you think the EV transition is going to take a long time, look at the Tesla sales prices. They are down by 33% this year. A Tesla car is already cheaper than a Camry, if you live in California or other states with subsidies for EV’s. Check out Lithium prices - they have collapsed since going up by 5x in 2022 and I think they are heading back to 2021 levels. We are starting to go into the steep S- curve part of EV adoption. I would not be surprised if 5 years from now 30%+ of the cars sold in the US are EV’s. It’s going to be higher in Europe and China for sure.

 

Things start slowly, but once you hit the 5% threshold, the adoption typically happens very quickly.

 

Of course ICE cars keep driving for more than a decade after the last one are sold.

 

On the repair side, we are looking at less frequent but very expensive repaid. The Teslas are already known to be hideously expensive to repair. Same with Rivians according to some news blips I have seen. There is probably going to be a great aftermarket business for replacement batteries, sensors, more business for tires (high torque of EV’s causes more tire wear) and a few other things like sensors.

Edited October 7, 2023 by Spekulatius

[Paarslaars]

4 hours ago, Gamecock-YT said:

 

might be out the window with the israel news this morning

So how are we playing this, diamonds and precious metals?