Energy Sector

[KPO]

On 12/4/2022 at 6:25 AM, Sweet said:

What if it never returns to those averages @dealraker ?

 

Many view fossil fuels as a dying industry, and with the rise of environmental investing, a lot less are interested in it.

 

I don’t agree with any of that, but others do, and that is a headwind.

I tend to think the underappreciated aspect of oil is in its uses in things like the roads we drive on (how is asphalt made?!?) the tires on all cars (especially heavy EVs) and the oil based plastics that make up a significant portion of auto interiors (including EVs). Also, more generally you can’t build many products or develop chemicals, including most fertilizers, without fossil fuels. The runway is more than the ~10 years the ESG crowd thinks fossil fuels will exist.  

[rohitc99]

39 minutes ago, KPO said:

I tend to think the underappreciated aspect of oil is in its uses in things like the roads we drive on (how is asphalt made?!?) the tires on all cars (especially heavy EVs) and the oil based plastics that make up a significant portion of auto interiors (including EVs). Also, more generally you can’t build many products or develop chemicals, including most fertilizers, without fossil fuels. The runway is more than the ~10 years the ESG crowd thinks fossil fuels will exist.  

+1 including pharmaceuticals, paints, comestics and even food and packaging. if you dig into the chemicals value chain, oil related chemicals are everywhere

 

till we can figure direct carbon capture at scale and right cost and somehow convert that cheaply to hydrocarbons, i cant see usage of oil go to zero. ofcourse usage of oil for fuel could drop sometime in the future based on current trends

[Gregmal]

1 hour ago, KPO said:

I tend to think the underappreciated aspect of oil is in its uses in things like the roads we drive on (how is asphalt made?!?) the tires on all cars (especially heavy EVs) and the oil based plastics that make up a significant portion of auto interiors (including EVs). Also, more generally you can’t build many products or develop chemicals, including most fertilizers, without fossil fuels. 

Yes. And last we checked oil is now back at $70 but for some reason people want to keep talking about inflation even though there’s been none for quite a while now and continuing to fight this boogeyman that doesn’t exist will just harm the economy way more than grocery prices being 10% higher ever would. Of course it’s all just a bs cover by the 1% to perpetuate the “great reset”. 

[Spekulatius]

On 12/4/2022 at 9:51 AM, Sweet said:

^ China is for sure a bear case too.

 

Overall though, I do think higher for longer mantra is about right.

 

Will energy companies reprice in at higher multiples, yes, but I think probably not as much as people might expect.

 

I do think energy has a much longer runway than the mainstream view, Larry Fink says 70 years - not sure about that long but certainly multiple decades.

If stocks are cheap enough to pay out cash to shareholders, you don’t need rerating. I only buy energy stocks that pay our more than 10% on equity annually over a cycle and preferably much more. That way, you would get a return no matter what Mr Market is doing with the multiples.
More often than not, betting on an expanding multiple is a fools errand especially for an entire sector. It could happen, but may not or may even go the other way.

 

If I had to make a bet, hydrocarbon extraction is going to be a substantial business 50 years from now but probably smaller measured by volume than it is now. As for prices, I have no idea and they probably continue to fluctuate wildly.

 

 

 

 

 

 

[Ulti]

https://podcasts.apple.com/us/podcast/the-economics-of-the-energy-transition/id1081481629?i=1000589100097

 

Oxford egghead on where the cost savings on energy transition is going.

[fareastwarriors]

holy grail...

 

 

US scientists boost clean power hopes with fusion energy breakthrough Net energy gain indicates technology could provide an abundant zero-carbon alternative to fossil fuels

[SharperDingaan]

The market will sing a different tune in the new year, once winter sets in and millions of Europeans start receiving their gas and electric bills. Everybody claiming poverty after Christmas, screaming for lower interest rates and longer time frames over which to finance their outstanding debt, and gas companies both rationing gas above X BTU/month per user, and restricting it from those not paying on time. 

 

And all of it assuming no accidents at Russian LNG terminals. Can't buy LNG from a ME supplier, swapping it with a Chinese entity, obtaining it from a Russia - if the Russian terminal/pipeline is unable to deliver. Nord Stream can be such a bastard 

 

SD

[Sweet]

2 hours ago, SharperDingaan said:

The market will sing a different tune in the new year, once winter sets in and millions of Europeans start receiving their gas and electric bills. Everybody claiming poverty after Christmas, screaming for lower interest rates and longer time frames over which to finance their outstanding debt, and gas companies both rationing gas above X BTU/month per user, and restricting it from those not paying on time. 

 

And all of it assuming no accidents at Russian LNG terminals. Can't buy LNG from a ME supplier, swapping it with a Chinese entity, obtaining it from a Russia - if the Russian terminal/pipeline is unable to deliver. Nord Stream can be such a bastard 

 

SD

Greetings from the UK where low temperature and zero wind have combined to drive peak electricity prices to an all time high of >£2,600 Mega Watt Hour.  The high prices are here… again.

Edited December 11, 2022 by Sweet

[Spekulatius]

56 minutes ago, Sweet said:

Greetings from the UK where low temperature and zero wind have combined to drive peak electricity prices to an all time high of >£2,600 Mega Watt Hour.  The high prices are here… again.

Ouch, that’s more than 5x the hugely inflated prices on the European continent! What does the Uk do to alleviate the situation?  Germany builds LNG infrastructure like crazy to replace the Russian NG with LNG.

 

The problem won’t solve itself.

Edited December 11, 2022 by Spekulatius

[Sweet]

22 minutes ago, Spekulatius said:

Ouch, that’s more than 5x the hugely inflated prices on the European continent! What does the Uk do to alleviate the situation?  Germany builds LNG infrastructure like crazy to replace the Russian NG.

 

It’s maybe not as bad on the continent, but still bad there too.
 

The figure above is peak demand, from 5-6pm only.  Average daily price perhaps is £600ish.  Still expensive.

 

UK is somewhat fortunate that we get half our Natural Gas from the North Sea fields.  Yes limited storage of natural gas as you say, however a large storage terminal was reopened this winter because it is now economical at the higher gas prices.

 

We have an over reliance on wind power which can produce roughly half of UK electricity.  It has lead to complacency.  The UK is ok if it is cold and windy… but cold and calm for long periods = trouble.

 

I think we will struggle to keep the lights on all winter.  I have been preparing for blackouts since the summer.  I bought a petrol to electricity generator and got an electrician to hook it up to our house’s circuit.  Hope I don’t need it.

 

 

 

 

Edited December 12, 2022 by Sweet

[UK]

https://www.bloomberg.com/opinion/articles/2022-12-05/the-worst-of-europe-s-energy-crisis-isn-t-over-electricity-blackouts-loom

 

The other is that although prices are lower than in July and August, they remain high enough to kill the manufacturing sector. When Russia invaded Ukraine in late February, many executives braced themselves for a six-week energy crisis; soon, they realized it would last at least six months. Now they fear it’s going to be six years. Last week, Thomas Schaefer, one of the most senior executives at Volkswagen AG, publicly said what many other business people and policy makers had only raised in private. “When it comes to the cost of electricity and gas, in particular, we are losing more and more ground,” he said, warning that unless prices fall quickly, investment in Europe will be “practically unviable.” The reality is: Energy prices remain extremely high, the continent is at the mercy of the weather, the cost of subsidies is rising at an unsustainable pace, and companies are warning of deindustrialization. Call me a pessimist, but it doesn’t sound like the worst is over to me. That’s because it isn’t.

[SharperDingaan]

36 minutes ago, Spekulatius said:

Ouch, that’s more than 5x the hugely inflated prices on the European continent! What does the Uk do to alleviate the situation?  Germany builds LNG infrastructure like crazy to replace the Russian NG with LNG.

 

The problem won’t solve itself.

 

They get the US to double gas exports to Britain, both directly ... and indirectly via closer 3rd party states. Most likely near term 'stabilization', by keeping spot over a target price, and taking physical delivery on expiring options/forwards at Europe's major collection facilities. Longer term, Biden cuts a deal with industry for more gas vs oil - which everybody can live with. https://oilprice.com/Energy/Natural-Gas/US-To-Bail-Out-Britain-By-Doubling-Natural-Gas-Exports.html

 

SD

Edited December 12, 2022 by SharperDingaan

[Pelagic]

15 hours ago, Sweet said:

 

It’s maybe not as bad on the continent, but still bad there too.
 

The figure above is peak demand, from 5-6pm only.  Average daily price perhaps is £600ish.  Still expensive.

 

UK is somewhat fortunate that we get half our Natural Gas from the North Sea fields.  Yes limited storage of natural gas as you say, however a large storage terminal was reopened this winter because it is now economical at the higher gas prices.

 

We have an over reliance on wind power which can produce roughly half of UK electricity.  It has lead to complacency.  The UK is ok if it is cold and windy… but cold and calm for long periods = trouble.

 

I think we will struggle to keep the lights on all winter.  I have been preparing for blackouts since the summer.  I bought a petrol to electricity generator and got an electrician to hook it up to our house’s circuit.  Hope I don’t need it.

 

 

 

 

 

How does power pricing work for the individual home owner there? Are you incentivized somehow to use less during peak demand or is that peak demand pricing paid by the utility company and they subsidize somewhat their customers at an average rate? 

 

 

[Sweet]

1 hour ago, Pelagic said:

 

How does power pricing work for the individual home owner there? Are you incentivized somehow to use less during peak demand or is that peak demand pricing paid by the utility company and they subsidize somewhat their customers at an average rate? 

 

 

 

 

The end customer pays their energy company a flat rate which can be adjusted on a monthly basis.

 

The price the energy companies pay is the wholesale price of energy, and they take the market rate when they need energy.

 

Yes, some companies do offer incentives for using energy off peak demand, one particular company was offering a rebate on some bills if they avoided using electricity at the peak morning and evening times.

 

 

 

Edited December 12, 2022 by Sweet

[Sweet]

Bear in mind that this is peak prices, it’s not representative over the day.  Journalists do like a bit of exaggeration… still it’s bloody expensive:

 

 

[Pelagic]

2 hours ago, Sweet said:

Bear in mind that this is peak prices, it’s not representative over the day.  Journalists do like a bit of exaggeration… still it’s bloody expensive:

 

 

 

Seeing this I can start to appreciate the marketing Ford is doing related to its Lightning pickup truck being able to power a home, a few were even used post Hurricane Ian. Imagine being able to feed power stored in your car's battery back into the grid and sell it during price spikes. Would likely curb some of the insane price spikes during calm and extreme cold conditions, a lot more small sellers coming online, and incentivize EV/Hybrid adoption as your car is now a backup option for home power. To be fair a lot of gas/diesel trucks come with an AC outlet option that can use the engine as a generator too - mainly for using tools at a jobsite.

 

https://www.ford.com/trucks/f150/f150-lightning/features/intelligent-backup-power/

Edited December 12, 2022 by Pelagic

[Sweet]

2 hours ago, Pelagic said:

 

Seeing this I can start to appreciate the marketing Ford is doing related to its Lightning pickup truck being able to power a home, a few were even used post Hurricane Ian. Imagine being able to feed power stored in your car's battery back into the grid and sell it during price spikes. Would likely curb some of the insane price spikes during calm and extreme cold conditions, a lot more small sellers coming online, and incentivize EV/Hybrid adoption as your car is now a backup option for home power. To be fair a lot of gas/diesel trucks come with an AC outlet option that can use the engine as a generator too - mainly for using tools at a jobsite.

 

https://www.ford.com/trucks/f150/f150-lightning/features/intelligent-backup-power/

 

Yes it’s a good idea and attractive to many including myself.

 

I often wonder why no ICE cars are designed to double as an electric generator.

[Spekulatius]

49 minutes ago, Sweet said:

 

Yes it’s a good idea and attractive to many including myself.

 

I often wonder why no ICE cars are designed to double as an electric generator.

The car/truck would need a huge generator to do so. It would be a waste for almost anyone. 

[Sweet]

Just now, Spekulatius said:

The car/truck would need a huge generator to do so. It would be a waste for almost anyone. 

I don’t mean built in to max the use of the engine, I mean something smallish which can be attached and run while the car is idling.  Not viable?  There has to be a reason why it’s not been done.

[Ulti]

https://podcasts.apple.com/us/podcast/the-price-cap-on-russian-oil/id1081481629?i=1000590062383

 

Excellent explanation of all things concerning Russian price caps, future price caps on refined products coming up in Feb'23, etc by Columbia Energy Exchange

[bizaro86]

On 12/12/2022 at 5:20 PM, Sweet said:

I don’t mean built in to max the use of the engine, I mean something smallish which can be attached and run while the car is idling.  Not viable?  There has to be a reason why it’s not been done.

 

Seems like plug in hybrids- which are generally battery EVs with a gasoline generator in them, would be ideal for this application.

[Spekulatius]

9 minutes ago, bizaro86 said:

 

Seems like plug in hybrids- which are generally battery EVs with a gasoline generator in them, would be ideal for this application.

I see this the same way. A truck with a huge generator should be a hybrid because if you build a truck with big generator, you might as well use it to drive the car (via electricity/ batteries and an electric motor).

[SharperDingaan]

On 12/12/2022 at 7:20 PM, Sweet said:

I don’t mean built in to max the use of the engine, I mean something smallish which can be attached and run while the car is idling.  Not viable?  There has to be a reason why it’s not been done.

 

In parts of Europe it is common practice to charge your hybrid at your house, at night, and pay a low rate for the power. If you aren't using the hybrid next day, the hybrid simply dumps its charge into the grid at a set time, and at the prevailing (higher) rate at the time; pocket the difference in rate x quantity of charge. When you already have solar on your roof, and meters that allow two-way flow, the hybrid simply becomes another battery; it's just one that you can drive!

 

Similar thing around stationary bikes in gyms. The gerbils pump the pedals, the rotation generates charge stored in a battery, dump the charge into the grid next day at a high rate. All controllable from your smart 'phone.

 

SD

[Viking]

Understanding supply and demand is key to understanding the price of a commodity like oil. What have we learned the past month?

 

1.) China is officially abandoning its zero covid policy. Which of course will stimulate demand for oil in the coming months. 
2.) Russia… i am not sure anyone understands what is going on in Russia today from a supply perspective (other than they appear to be hanging in there). What is clear is upstream investment will be down about 30% in 2023 (below covid levels). This suggests to me Russian production will struggle to remain flat moving forward and will likely fall.

3.) US SPR release: this is set to end any month. 
4.) does the US enter a recession in 2023 as predicted by many?

 

Bottom line, driven by China’s reopening, looks to me like oil markets will remain tight.
—————

Russian upstream investments set to plunge by $15 billion this year as sanctions obscure production outlook

- https://www.rystadenergy.com/news/russian-upstream-investments-set-to-plunge-by-15-billion-this-year-as-sanctions-o

 

The financial impact of Western sanctions and the widescale exodus of foreign partners from the Russian oil and gas sector are beginning to materialize, with upstream investments set to sink to $35 billion in 2022, according to Rystad Energy research. Before Russia’s invasion of Ukraine in late February this year, upstream investments in Russia were expected to approach $50 billion in 2022.

 

 

 

 

Edited December 15, 2022 by Viking

[Castanza]

Assuming most of you saw the breakthrough in Nuclear Fusion. I'm assuming this is a relative big deal in the long run but also not very actionable in the near term. Easy headline to print for news organizations. Could draw some attention from more serious funding sources moving forward. 

 

Anyone on here invest in the nuclear space or have any insights to share?