I like Oil

[MichaelB]

Agree! Certainly politics has never been a part of the oil industry.

Thanks for your support.

 

[eytonxav]

Controlling oil imports sounds like the beginning of a trade war. I thought that high tariffs and trade wars were what caused the great depression in the 30's. I'm thinking there might be a better way.

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I wouldn't term this thought as a trade war, but what is wrong with supporting the industry within your own county, particularly if another country is out to kill your market growth.

 

[ERD50]

Thanks for your support.

Now if only we could get the politicians to agree! -ERD50

 

[ERD50]

I wouldn't term this thought as a trade war, but what is wrong with supporting the industry within your own county, particularly if another country is out to kill your market growth.

In some cases, the other countries retaliate with their own trade barriers.

Also, if we can get a product cheaper from outside our borders, shouldn't we do that? Isn't that good for our economy? Better to produce the things here that we are good at, and sell those to people outside our borders who cannot produce it cheaper than we can.

-ERD50

 

[eytonxav]

In some cases, the other countries retaliate with their own trade barriers.

Also, if we can get a product cheaper from outside our borders, shouldn't we do that? Isn't that good for our economy? Better to produce the things here that we are good at, and sell those to people outside our borders who cannot produce it cheaper than we can.

-ERD50

In general, I agree with what you are saying. However, we have nafta with canada and mexico, and could continue to buy from them and use our own oil production. Certainly the OPEC countries are not buying our oil.

It seems to me, we forget the lessons learned from the 1970s and why being energy independent from foreign energy sources has been a long time mantra, but never seems to be realized.

 

[ESRwannabe]

DFW_M5,

My crystal ball tells me that within the next 10 years the energy sector will be more important to the US economy. A lot of oil exporting countries are supposed to have declining production while the world demand is projected to grow... A lot of the energy exports will come from the US.

Long story short, I think the energy sector will be more important a few years from now. So at that time I could see more support being available. I'll also bet that the US will push for countries to switch natural gas to replace coal power plants as a way to meet carbon emission goals.

The US gets about 30% of its power from coal right now. My expectation is that natural gas will replace this.

In regards to Saudi Arabia, yes I think they are intentionally "dumping", but domestic oil isn't important enough right now to do anything. Fortunately, I don't think it matters. The IEA data shows the surplus all but going away by 2017 and deficits after that. There have been record amounts of capex reductions that will work their way into affect gradually.

If the war in Yemen keeps going on and SA gets directly involved in Syria, then they will deplete their cash reserves soon enough.

 

[explanade]

I wish there was an easy solution to $70/BBL oil (which we all need), but there doesn't seen to be one.

By "we all" you're referring to the oil industry and the people who invest in it?

The world at large would not benefit from oil being over twice the price it is now?

 

[aja8888]

By "we all" you're referring to the oil industry and the people who invest in it?

The world at large would not benefit from oil being over twice the price it is now?

$70 is a discount from when it was over $100/BBL. Oil producers would be staying solvent at $70 (most of them). Can't comment on your second question.

 

[ESRwannabe]

By "we all" you're referring to the oil industry and the people who invest in it?

The world at large would not benefit from oil being over twice the price it is now?

It probably would be better actually...

The amount of capex that has been cut is huge. We are setting up for a monster price spike.

 

[explanade]

There are more people unconnected to the industry than there are oil production companies.

I just got back from New Zealand where I drove over 2500 kilometers over 2-3 weeks.

Definitely better for me that oil is at the price it is now. I'm sure it was better for other tourists and the tourism industry all over the world.

 

[aja8888]

There are more people unconnected to the industry than there are oil production companies.

I just got back from New Zealand where I drove over 2500 kilometers over 2-3 weeks.

Definitely better for me that oil is at the price it is now. I'm sure it was better for other tourists and the tourism industry all over the world.

Tell us it's better when the airlines lower fare prices based on less expensive jet fuel prices.

 

[Fermion]

A few years back UPS starting having a fuel surcharge when you ship stuff because of higher fuel prices.

With gas at 1.75 a gallon or lower, they have not removed this surcharge.

 

[Mulligan]

Tell us it's better when the airlines lower fare prices based on less expensive jet fuel prices.

About a year when prices dropped, I started thinking, my airfares to Vegas are going to get a lot cheaper. Im still waiting.... Usually flied with SW, but I havent since oil price dropped as they have kept every penny and then some. Their airfares are higher now in my market than they were before oil dropped. They have perfected the art of convincing people they are a "low priced carrier" while charging anything but low prices. The rust bucket low frills have lowered prices some. Usually most of the plane is still intact by the time we land so I will continue using them based on price alone. Sitting on a bolted down milk crate with seat belt isnt comfortable, but I can tolerate anything for a few hours and keeping money in my pocket.


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[NW-Bound]

A recent Bloomberg article makes the case that more EVs will be in circulation, and that will cut into oil demand further.

See: Here's How Electric Cars Will Cause the Next Oil Crisis

I like EVs, except for their cost. The drive train is simpler, and requires less maintenance. The only hangup is with the battery, both regarding cost and longevity. We need lithium batteries to come down in price, and if they are cheap enough the longevity problem goes away too. I don't know about the progress on that front.

Currently, 70% of oil usage in the US is for transportation, so this is where EVs can help. The cost of solar power keeps coming down, but we have no place to store the production excess of the day. An EV is just as good a place as any to store the excess energy captured daily.

However, with oil price so low, that makes it more difficult for the EV to compete. It is interesting to see how it will play out.

 

[NW-Bound]

You folks that are gambling...why not jump on some ETE @$4.10/share? Pays a 27% dividend. CFO quit so it may be an opportunity for a pop.

Good call. ETE is trading at $6.61 currently, for a gain of 61% in a bit more than 2 weeks.

No, I did not buy.

 

[ERD50]

....

I like EVs, except for their cost. ...

And the pollution created in generating the electricity. I don't want to sidetrack this thread with an extended discussion on that, we've had them before, but the short version is that EVs will add demand to the grid, and as long as renewable electricity is less than 100%, those EVs are tapping into the dirty electricity. It's a matter of marginal generation, averages don't matter much.

Currently, 70% of oil usage in the US is for transportation, so this is where EVs can help.

But how much of that is long distance driving, (semis getting ~ 5 mpg, trains getting higher mpg, but still consuming a lot of oil), where EVs are not even a consideration for the foreseeable future?

... The cost of solar power keeps coming down, but we have no place to store the production excess of the day. An EV is just as good a place as any to store the excess energy captured daily.

That always sounds good on the surface, but that means a large % of those EVs have to plugged in at midday to be available to absorb any excess. And many days, there will be no excess, but those EVs need to be 'run down', ready to absorb it if there is, and also ready to be charged if the sun isn't shining, since they were run down to begin with. A smart charging system (overcast tomorrow, so fully charge tonight) could overcome some of this.

But also consider, in many parts of the country, you would need a LOT of solar PV to have excesses often enough to even make it worthwhile to absorb with a system like a bunch of scattered EVs. We now have ~ 0.4% of our electricity from solar. We would need a LOT more to see excesses routinely. And here in the Midwest, the output of panels is so much lower in winter, that you wouldn't have near year-round excesses to recover until there was REALLY a LOT of solar PV. And if you can't do it routinely, and during most of the year, it's harder to get the costs back (chargers available during the day in company parking lots, instead of charging at home at night).

Add to that - these batteries will be degraded by extra charge/discharge cycles. EV batteries are among the highest cost batteries we have, since they need to be small, light, withstand a crash, and last many years. I'll wager that cheap, stationary batteries, or some other energy storage will be a LOT more practical than using up precious kWh of EV batteries.

IIRC, only one of the Tesla PowerWalls is designed for daily charge/discharge - and it is far more $/kWh than the one designed for occasional backup use.

However, with oil price so low, that makes it more difficult for the EV to compete. It is interesting to see how it will play out.

True, but I think it is also keeping NG low, and that helps to offset coal, which might be doing more good than EVs?

-ERD50

 

[ESRwannabe]

I read the Bloomberg article predicting 50% of cars will be EV by 2040 and the source material is from "Bloomberg New Energy Finance (BNEF)".

Not entirely sure how Bloomberg expects to make money off of this.

Home | Bloomberg New Energy Finance

Anyway, both the IEA and OPEC predict that EV will make up around 1% of cars by 2040...

 

[eytonxav]

Question for aja: I heard something to the effect that most of the oil extracted here in the US is light crude and that one of the reasons we can't make more use of our own oil has to do with existing distilling/processing capacity is geared to process heavy crude which comes from offshore. Does that sound right to you?

 

[NW-Bound]

I read the Bloomberg article predicting 50% of cars will be EV by 2040 and the source material is from "Bloomberg New Energy Finance (BNEF)".

Not entirely sure how Bloomberg expects to make money off of this.

Home | Bloomberg New Energy Finance

Anyway, both the IEA and OPEC predict that EV will make up around 1% of cars by 2040...

The Bloomberg article I referenced says EVs will comprise 35% of new car sales by 2040, not 50%. So, perhaps they are still tweaking their forecast. I am no expert, but think the other guys' 1% in 2040 is way too low.

By the way, that Bloomberg article also claims that lithium battery cost dropped 35% last year. Could it be like LED lights, where they are suddenly so cheap now at Home Depot and Lowe's? No wonder CFLs are now dead.

Perhaps it will take a long time to have enough solar to really get excess electricity. But if solar installation grows in parallel with EV growth, such that the popularity of EVs does not cause additional stress to the electric grid, that helps already.

About how much of the 70% oil usage is for automobiles, it is true that it would be tough to eliminate the need for diesel for long-distance trucking; batteries to run an 18-wheeler would be so expensive nobody even thinks about it right now.

So, how much of the oil is used for personal autos? A source I saw said about 9 million barrels/day. That's 47% out of 19 million barrels/day total consumption. So, if 1/3 of the cars do not use oil, that would reduce demand by 3/19 = 16%. It's significant.

To have a feel for the 3 million barrels/day in oil saving by EVs, we can look at the extra oil produced by fracking. Fracking has increased oil production from 5 million barrels/day in 2008 to 7.4 million barrels/day in 2014.

 

[dallas27]

One scenario no one has mentioned yet is semi-permanent oversupply of oil plus solar for a decade or two leading to energy accessibility to masses of the world that couldn't afford it before and enabling a mini-global-boom in industry and consumption.

Just thinking a little outside in this one to exercise my imagination.




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[harley]

Well, if my energy stocks are going back up, they better do it soon so I can sell before the big energy miracle - BILL GATES INTERVIEW: Energy miracle coming - Tech Insider

 

[aja8888]

Question for aja: I heard something to the effect that most of the oil extracted here in the US is light crude and that one of the reasons we can't make more use of our own oil has to do with existing distilling/processing capacity is geared to process heavy crude which comes from offshore. Does that sound right to you?

Our U.S.produced crude oil varies all over the lot, based on location found. I don't know the API gravity mix and sulfur content by geologic formation produced, but that can be researched. Our refineries handle light crude much easier than "heavy" crude since less refining is needed to obtain the high value products. If the crude is not sweet (high sulfur), a sulfur recovery unit is in the process to remove it and you end up with very large volumes of low value sulfur.

Heavy crude needs more treatment and possibly a "coker unit" to process the heavy ends at the end of the refining processes, ending with petroleum coke. Not all refineries are equipped with cokers and it's a messy, costly process that ends up with large volumes of low margin product. I've seen some U.S. crude oil that is so heavy that steam injection is needed to get it out of the ground and the above ground storage tanks are kept heated with steam coils so it flows at room temperature. But that's a rare case.

The bottom line is light sweet (low sulfur) crude is very desireable for refiners and they typically pay a premium for that stock. Saudi crude is the lighter product.

The larger refineries in the U.S. can handle a wide variety of crude with varying percentages of sulfur and different API gravity. These are owned by the majors and large independents (ExxonMobil, Chevron, Valero, Hess, etc).

I hope this answers your question, but there is not one clear answer as the business is very fragmented.

 

[explanade]

Airlines run sales but there seems to be high demand for travel.

Supposedly China is slowing down, which is causing oil and every other commodity to drop in price.

Yet there were a lot of Chinese tourists in NZ for Chinese New Year. All the businesses were catering to them, with signs about the Year of the Monkey and all kinds of signs in Chinese.

 

[dirt_dobber]

watch this - it is amazing.

Watch Five Years of Oil Drilling Collapse in Seconds

Watch five years of oil drilling collapse in seconds. The oil crash has taken its toll.

 

[eytonxav]

The bottom line is light sweet (low sulfur) crude is very desireable for refiners and they typically pay a premium for that stock. Saudi crude is the lighter product.

The larger refineries in the U.S. can handle a wide variety of crude with varying percentages of sulfur and different API gravity. These are owned by the majors and large independents (ExxonMobil, Chevron, Valero, Hess, etc).

I hope this answers your question, but there is not one clear answer as the business is very fragmented.

Thanks again for the detailed answer. I am going to give up looking for a simple solution as this area is just too complex.