Author Topic: Oil Investing  (Read 5786 times)

TomTX

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Re: Oil Investing
« Reply #50 on: October 12, 2020, 05:42:11 PM »
Whatíre thoughts on investing in an oil fields?

Great way to have your money looted by an experienced operator.

certainly this is true for the publicly traded royalty trusts! Do you think that direct held mineral rights are also treated badly?  I only have very limited info from some guys who run a fund that owns mineral rights.

Unless you're talking about land where you already own mineral rights....

Great way to have your money looted by an experienced operator.

The oil patch is not kind to noobs with money to invest. Heck, experienced investment banks often get screwed over.

waltworks

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Re: Oil Investing
« Reply #51 on: October 12, 2020, 06:34:23 PM »
I once suggested that I could (due to my pseudo insider info) invest in oil leases, companies, futures, etc to my FIL.

He compared this idea to (and I roughly quote), "taking acid and trying to win carnival games".

-W

brellis1vt

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Re: Oil Investing
« Reply #52 on: October 13, 2020, 08:16:44 AM »
I work in the industry (primarily on the gas side) and I don't consider O&G investible.  There will be some good moments but the long term trend will be more negative especially as we move to electric vehicles.  Fracking makes bringing new production on very easy.  So if you get higher prices at all the market will get flooded again.

bthewalls

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Re: Oil Investing
« Reply #53 on: October 13, 2020, 03:46:59 PM »
Previously mentioned Vanguard Energy ETF.....Iíve been buying It this past while as itís so low and going Lower.

Seems like a nobrainer since post Covid itís likely to rebound

Anyone else buying similar.?

Barry

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Re: Oil Investing
« Reply #54 on: October 13, 2020, 04:01:10 PM »
Previously mentioned Vanguard Energy ETF.....Iíve been buying It this past while as itís so low and going Lower.

Seems like a nobrainer since post Covid itís likely to rebound

Anyone else buying similar.?

Barry
Yeah, I bought a little bit of VDE. When it comes back I'll swap it for a green energy ETF.

MustacheAndaHalf

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Re: Oil Investing
« Reply #55 on: October 14, 2020, 10:36:23 AM »
I work in the industry (primarily on the gas side) and I don't consider O&G investible.  There will be some good moments but the long term trend will be more negative especially as we move to electric vehicles.  Fracking makes bringing new production on very easy.  So if you get higher prices at all the market will get flooded again.
Fracking ramped up rapidly from 2005-2012, and there has definitely been bad years for the energy sector since that time.  So fracking impacting oil & gas profits makes sense, and fits the data.

The largest past stock drop for Vanguard Energy was in 2008 when it lost -43%.  On either side of that loss were +37% and +38% years for energy stocks.

In 2020 so far, Vanguard Energy mutual fund has dropped -39%.  That's under current circumstances, with oil demand at a low point.  To drop further, something has to get worse - from the current situation.

Oil demand rises every year, and I would guess energy demand is the same.  A recovery, at some point, means energy demand back to normal - back to before the -39% drop.  To me the question is over what time frame that recovery occurs, and if it's worth waiting.

WoodsRun

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Re: Oil Investing
« Reply #56 on: October 14, 2020, 01:48:36 PM »
I just started a position in VGENX today equivalent to about 5% of my portfolio. If it goes even lower as the year comes to a close I will definitely add. Energy at the moment is probably one of the most under-valued sectors. The reason energy is so low now is because of COVID as a previous poster has mentioned not because of a rise in EV sales (not yet). When the pandemic is over in about a year or two energy demand will go back to at least 2019 levels if not higher.

In about five years or when I feel energy has bounced back tremendously I might take a look at moving whatever is left in VGENX into something less risky (such as VTSAX or VTIAX).

brellis1vt

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Re: Oil Investing
« Reply #57 on: October 14, 2020, 02:07:26 PM »


I work in the industry (primarily on the gas side) and I don't consider O&G investible.  There will be some good moments but the long term trend will be more negative especially as we move to electric vehicles.  Fracking makes bringing new production on very easy.  So if you get higher prices at all the market will get flooded again.
Fracking ramped up rapidly from 2005-2012, and there has definitely been bad years for the energy sector since that time.  So fracking impacting oil & gas profits makes sense, and fits the data.

The largest past stock drop for Vanguard Energy was in 2008 when it lost -43%.  On either side of that loss were +37% and +38% years for energy stocks.

In 2020 so far, Vanguard Energy mutual fund has dropped -39%.  That's under current circumstances, with oil demand at a low point.  To drop further, something has to get worse - from the current situation.

Oil demand rises every year, and I would guess energy demand is the same.  A recovery, at some point, means energy demand back to normal - back to before the -39% drop.  To me the question is over what time frame that recovery occurs, and if it's worth waiting.

I agree with you there is a decent chance of short term gain (12 months) but overall the trajectory for pricing and value is lower.  I've been personally burned on investments every time I didn't exit after there were quick gains.  I don't agree on the oil demand rising every year though.  BP and others are releasing research that states we have already hit peak demand or are close.  From an economics standpoint think of it this way.  The energy equivalent for 1 bbl of oil cost $12-$18 for natural gas.  There are a lot of economic reasons to switch away from oil now.  For the timing aspect, based on my research, consumer demand is almost back to what it was.  Itís the rest of the demand that is off and the people I have followed are predicting it won't come back till mid 2021.

Imanuels

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Re: Oil Investing
« Reply #58 on: October 15, 2020, 01:41:56 AM »
Apparently Vanguard recongizes that the future might look different:
ďVanguard Energy Fund will increase exposure to utilities stocks starting in late 2020 as it adapts to the energy sectorís evolution away from fossil fuels and toward renewable energy sources.Ē
https://www.thinkadvisor.com/2020/08/24/vanguard-changes-energy-funds-benchmark-portfolio-products/

MustacheAndaHalf

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Re: Oil Investing
« Reply #59 on: October 15, 2020, 07:53:49 AM »
Imanuels - Note that VGENX is an actively managed fund, which is why you'd pay a 0.32% expense ratio versus 0.10% at VDE (Vanguard Energy ETF).  I have to admit, I'm impressed that fund has a history going back to 1985.

brellis1vt - I've seen reports that show oil demand rose every one of the past ~15 years except in 2009 (during the great financial crisis).  But here's something more recent from IEA, which shows two things of interest: first, the growth in oil demand per year 2011-2019, where growth is positive every year.  So oil demand has been growing every year for the past decade.  And second, the prediction for 2020 and 2021: negative growth in 2020, followed by catch up growth in 2021.
https://www.iea.org/reports/oil-2020

That reinforces my idea of a recovery in demand causing a spike, although I'd also be interested in other predictions that contradict the information I have.

bthewalls

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Re: Oil Investing
« Reply #60 on: October 16, 2020, 10:35:16 AM »
i think its fair to say that the world economy isnt going to wean of oil consumption any time soon, post current covid slump.

If alpha is goal, running parellel to overall index funds, why arent we all buying these currently crippled stocks at the moment?

Also some renewables are on the increase (Ive some REGI), so best of both worlds?

It great seeing the world going to electric cars, but its not going to happen all within a decade.

Interested to see if any errors in my theory guy, so feel free?

Barry

TomTX

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Re: Oil Investing
« Reply #61 on: October 16, 2020, 01:38:12 PM »
It great seeing the world going to electric cars, but its not going to happen all within a decade.

A decade is a long time when you have an industry disruption underway.

A decade ago, Tesla was hand-building a few hundred Roadsters per year. This year they will be producing roughly 1000x as many, even with the COVID-19 delays. By early 2021, they should have doubled capacity at Giga Shanghai. Sometime in 2021 we should also see production from Giga Berlin, Giga Austin and a production overhaul/upgrade at Fremont.  Giga Austin is slated to ramp up to producing 200GWh of batteries every year to feed Cybertruck, Semi and Model Y sales.

A decade ago, the only medium to large car manufacturer trying to sell an electric car was Nissan with the first few Leaf deliveries. Today, most major manufacturers are investing billions (or tens of billions) to shift to electric vehicles and the major battery suppliers are all ramping to hundreds of GWh/yr capacity. Each.

bthewalls

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Re: Oil Investing
« Reply #62 on: October 16, 2020, 02:27:24 PM »
It great seeing the world going to electric cars, but its not going to happen all within a decade.

A decade is a long time when you have an industry disruption underway.

A decade ago, Tesla was hand-building a few hundred Roadsters per year. This year they will be producing roughly 1000x as many, even with the COVID-19 delays. By early 2021, they should have doubled capacity at Giga Shanghai. Sometime in 2021 we should also see production from Giga Berlin, Giga Austin and a production overhaul/upgrade at Fremont.  Giga Austin is slated to ramp up to producing 200GWh of batteries every year to feed Cybertruck, Semi and Model Y sales.

A decade ago, the only medium to large car manufacturer trying to sell an electric car was Nissan with the first few Leaf deliveries. Today, most major manufacturers are investing billions (or tens of billions) to shift to electric vehicles and the major battery suppliers are all ramping to hundreds of GWh/yr capacity. Each.

good point...glad im in telsa!

MustacheAndaHalf

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Re: Oil Investing
« Reply #63 on: October 17, 2020, 01:51:10 AM »
It great seeing the world going to electric cars, but its not going to happen all within a decade.
A decade is a long time when you have an industry disruption underway.

A decade ago, Tesla was hand-building a few hundred Roadsters per year. This year they will be producing roughly 1000x as many, even with the COVID-19 delays. By early 2021, they should have doubled capacity at Giga Shanghai. Sometime in 2021 we should also see production from Giga Berlin, Giga Austin and a production overhaul/upgrade at Fremont.  Giga Austin is slated to ramp up to producing 200GWh of batteries every year to feed Cybertruck, Semi and Model Y sales.

A decade ago, the only medium to large car manufacturer trying to sell an electric car was Nissan with the first few Leaf deliveries. Today, most major manufacturers are investing billions (or tens of billions) to shift to electric vehicles and the major battery suppliers are all ramping to hundreds of GWh/yr capacity. Each.
Electric vehicles are 1% of the global car fleet.  However much you want to emphasize Tesla's achievements, they don't amount to much in terms of oil consumption.

In terms of oil, Tesla has made a good start, but they have not changed the world.  Elon Musk himself said if all car production switched to 100% electric vehicles today, it would still take 20 years to replace all of the gas fueled vehicles.  So Tesla's founder and CEO says it won't happen in 20 years if everyone gave it 100%.  You can look for "elon musk pot interview" - it was before he lit up.


If alpha is goal, running parellel to overall index funds, why arent we all buying these currently crippled stocks at the moment?
Some beaten down stocks could go bankrupt, which might scare people away.  Behavioral science has studied how people weigh losses and gains, and discovered people dislike a loss twice as much as they like a gain.  That risk of bankruptcy is probably keeping most investors away.

There's also uncertainty around the timing of a recovery.  A vaccine will probably prove successful in the next 1-2 months, but the story doesn't end there.  The vaccine's protection or effectiveness matters: what percentage of people are prevented from getting sick?  What problems are encountered with manufacturing hundreds of millions of doses (the U.S. will likely get the first doses of vaccine, while billions of doses will take longer).  And what percent of people get immunized?

Another consideration: the retail sector has already recovered.  If you look at SPDR S&P Retail ETF (XRT), it's 3 month performance is +44% (Yahoo Finance), and it's up +3% since 12 months ago.  So without looking at individual stocks, investors might not even discover that some stocks are struggling.

TomTX

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Re: Oil Investing
« Reply #64 on: October 17, 2020, 10:58:33 AM »
It great seeing the world going to electric cars, but its not going to happen all within a decade.
A decade is a long time when you have an industry disruption underway.

A decade ago, Tesla was hand-building a few hundred Roadsters per year. This year they will be producing roughly 1000x as many, even with the COVID-19 delays. By early 2021, they should have doubled capacity at Giga Shanghai. Sometime in 2021 we should also see production from Giga Berlin, Giga Austin and a production overhaul/upgrade at Fremont.  Giga Austin is slated to ramp up to producing 200GWh of batteries every year to feed Cybertruck, Semi and Model Y sales.

A decade ago, the only medium to large car manufacturer trying to sell an electric car was Nissan with the first few Leaf deliveries. Today, most major manufacturers are investing billions (or tens of billions) to shift to electric vehicles and the major battery suppliers are all ramping to hundreds of GWh/yr capacity. Each.
Electric vehicles are 1% of the global car fleet.  However much you want to emphasize Tesla's achievements, they don't amount to much in terms of oil consumption.

The context was the next decade, not current status.

Quick question: While 1% is tiny, what's 1% x 1,000?

...now, that's likely an overestimate. If we take Tesla's growth rate since the release of the Model S (first assembly line) - while there is year-to-year variance, the long term growth rate is over 50% per year.

Presume 2020 production of 480k, slightly conservative estimate. Project a mildly lower growth rate forward at 50% annual.

It reaches large numbers rather quickly.  I don't want to spoil the surprise.

Will this happen? Perhaps not - but someone investing in oil really needs to figure out why the trend would change, especially when BEV prices should hit equivalent to mainstream fossil vehicles within a few years. Keep in mind that numerous investors have been saying for quite a few years that Tesla can't possibly keep up their growth rate - the next few years appear to already be set up with new and upgraded factories. Giga Austin alone is slated for 200GWh of battery production a year.

PaulMaxime

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Re: Oil Investing
« Reply #65 on: October 17, 2020, 09:22:33 PM »
Human beings aren't good with exponential growth rates. Technology doesn't change linearly - it follows an exponential S curve.

If I asked you to compute 7 + 7 + 7 + 7 + 7 in your head you could do it easily, but 7 * 7 * 7 * 7 * 7 is far more difficult.

I can't recommend this talk by Tony Seba enough. https://www.youtube.com/watch?v=O-kbzfWzvSI

The first couple minutes he talks about two pictures of New York city in 1900 and 1913. In the 1900 photo there are a lot of horse drawn carriages and a single car. By 1913 there is only 1 horse in a sea of cars. 13 years.

And technology transformation is happening much faster these days than it was back then. I wouldn't be surprised to see 100% of new cars being electric in 10 years.

TomTX

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Re: Oil Investing
« Reply #66 on: October 18, 2020, 05:42:01 AM »
Yes, Tony has been giving variants of that talk for years - the neat thing about the current ones is that he can show how close reality is matching his predictions from 2014(?). Spoiler: It's pretty close.

I'll note that he's typically not talking about 100% adoption rates when he gives timeframes, it's more to somewhere around 80% adoption. That's when the S curve starts to flatten out again.

For me the adoption of EVs appears inevitable and rapidly increasing. The real wild card for oil demand is when EVs take over the ridesharing/taxi market and when automation of that market happens. It doesn't matter if EVs only have 10% of the fleet if they have 90% of the vehicle miles driven.

This video below is slightly more recent and an interview format for those who either prefer that over the lecture/TED talk style - or just want some more Tony Seba after the first one.

https://www.youtube.com/watch?v=mGzrcmDrFfo

MustacheAndaHalf

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Re: Oil Investing
« Reply #67 on: October 19, 2020, 10:17:58 AM »
TomTX - This thread is about oil investing over the next year or two.  For that purpose, Tesla isn't relevant over the next 2 years.  You replied to one sentence about this decade, and now are talking about the next decade - you seem to be hijacking this thread, when there's already a thread about Tesla on the forum.

PaulMaxine - You can explain that over in the thread about Tesla, but it's not relevant in the next two years.

PaulMaxime

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Re: Oil Investing
« Reply #68 on: October 20, 2020, 09:18:38 PM »
TomTX - This thread is about oil investing over the next year or two.  For that purpose, Tesla isn't relevant over the next 2 years.  You replied to one sentence about this decade, and now are talking about the next decade - you seem to be hijacking this thread, when there's already a thread about Tesla on the forum.

PaulMaxine - You can explain that over in the thread about Tesla, but it's not relevant in the next two years.

I actually disagree. I think you are seeing the end of the growth of oil as a good investment. I suggest that it's time to look elsewhere and that time is now.

brellis1vt

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Re: Oil Investing
« Reply #69 on: October 21, 2020, 06:47:15 AM »
Imanuels - Note that VGENX is an actively managed fund, which is why you'd pay a 0.32% expense ratio versus 0.10% at VDE (Vanguard Energy ETF).  I have to admit, I'm impressed that fund has a history going back to 1985.

brellis1vt - I've seen reports that show oil demand rose every one of the past ~15 years except in 2009 (during the great financial crisis).  But here's something more recent from IEA, which shows two things of interest: first, the growth in oil demand per year 2011-2019, where growth is positive every year.  So oil demand has been growing every year for the past decade.  And second, the prediction for 2020 and 2021: negative growth in 2020, followed by catch up growth in 2021.
https://www.iea.org/reports/oil-2020

That reinforces my idea of a recovery in demand causing a spike, although I'd also be interested in other predictions that contradict the information I have.

I think we are looking at different time horizons (mine is 5-10 years) but I recommend looking at BP's energy outlook: https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/energy-outlook/bp-energy-outlook-2020.pdf
On page 65 they list this: The level of oil demand in both Rapid and Net Zero (their models) does not fully recover from the sharp drop caused by Covid-19, with demand falling by around 50% by 2050 in Rapid and almost 80% in Net Zero. The outlook for oil is more resilient in BAU, with demand in 2050 declining slightly from its current level (pp 66-67).

ChpBstrd

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Re: Oil Investing
« Reply #70 on: October 21, 2020, 07:29:04 AM »
I think to summarize the above:

It would be easier for an industry with good long-term prospects to do well in the next 2ish years than an industry with poor long-term prospects.

TomTX

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Re: Oil Investing
« Reply #71 on: October 21, 2020, 10:51:35 AM »
TomTX - This thread is about oil investing over the next year or two.  For that purpose, Tesla isn't relevant over the next 2 years.  You replied to one sentence about this decade, and now are talking about the next decade - you seem to be hijacking this thread, when there's already a thread about Tesla on the forum.

PaulMaxine - You can explain that over in the thread about Tesla, but it's not relevant in the next two years.

I reject your presumptions three different ways:

1) Talking about the biggest threat/downside potential to an investment is extremely relevant. Ignoring it is dumb, especially when the threat is already happening.

2) I'm talking about the upcoming decade (ie, 2020-2030) which is the timeframe specified by you. It appears you didn't do the simple calculation of growth I suggested.

3) 1-2 years sounds like you're a gambler, not an investor. Perhaps your approach would be more suitable for discussion somewhere like r/wallstreetbets

PaulMaxime

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Re: Oil Investing
« Reply #72 on: October 21, 2020, 01:06:50 PM »
TomTX - This thread is about oil investing over the next year or two.  For that purpose, Tesla isn't relevant over the next 2 years.  You replied to one sentence about this decade, and now are talking about the next decade - you seem to be hijacking this thread, when there's already a thread about Tesla on the forum.

PaulMaxine - You can explain that over in the thread about Tesla, but it's not relevant in the next two years.

I reject your presumptions three different ways:

1) Talking about the biggest threat/downside potential to an investment is extremely relevant. Ignoring it is dumb, especially when the threat is already happening.

2) I'm talking about the upcoming decade (ie, 2020-2030) which is the timeframe specified by you. It appears you didn't do the simple calculation of growth I suggested.

3) 1-2 years sounds like you're a gambler, not an investor. Perhaps your approach would be more suitable for discussion somewhere like r/wallstreetbets

I think it's OK to disagree about this. It's what makes a market.

No reason to stoop to insults. If you think oil is going to be a good investment over the next 10 years, great. Put your money there.

Personally as a long term investor I see nothing besides pain for the Oil industry starting now and going forward. I'm staying away. I think the end is coming much faster than the incumbents predict - creative destruction is on its way.

We will certainly be using fossil fuels as far into the future as the eye can see, but it's not going to be a growth investment, IMHO. I'm putting my money in other things.

norajean

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Re: Oil Investing
« Reply #73 on: October 22, 2020, 09:36:30 AM »
People have been saying coal is dead since oil first boomed 100 years ago. Guess what? Global coal consumption is currently at an all time historic high. Forecasts for development indicated that even with modest growth all forms of energy will need to increase to meet demand but there will still be a shortfall as India and China gentrify and a few billions people expect electricity etc.

PaulMaxime

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Re: Oil Investing
« Reply #74 on: October 22, 2020, 03:19:48 PM »
People have been saying coal is dead since oil first boomed 100 years ago. Guess what? Global coal consumption is currently at an all time historic high. Forecasts for development indicated that even with modest growth all forms of energy will need to increase to meet demand but there will still be a shortfall as India and China gentrify and a few billions people expect electricity etc.

https://yearbook.enerdata.net/coal-lignite/coal-world-consumption-data.html

New decline in global coal consumption (-2.6%) despite growth in China (+1%)
After two years of recovery, global coal consumption declined again in 2019 (-2.6%). Public and private climate policies, combined with competition from cheaper gas-fired and renewable power generation have accelerated the closure of many coal-fired power plants and resulted in dramatic cuts in coal consumption in the EU (-18%, including significant drops in Germany, Poland and Spain) and in the USA (-12%, where nearly 14 GW of coal-fired power capacity was retired in 2019).
Coal consumption grew by 1% in China, which accounts for half of the global coal demand. The Chinese government aims at substituting coal use with gas and renewables but the coal-to-gas conversion policy relaxed in 2019.
In India, the second largest coal consumer worldwide, coal consumption declined by 3.4%, due to higher hydropower and renewable generation that cut coal needs in the power sector.
Coal consumption slowed down in Indonesia (+8.9%, i.e. half its 2018 growth), and decreased in South Korea and Japan, due to a lower demand from the power sector (reduced electricity consumption, nuclear competition, and air pollution constraints).
It also slowed down in large coal producing countries such as Russia (coal-to-gas switch in the power sector) and South Africa (reduced operations at coal-fired power plants due to technical issues) and even contracted in Australia and Turkey.


So it looks like it peaked in 2013 and is slowly dropping. We'll see where it goes from here.

norajean

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Re: Oil Investing
« Reply #75 on: October 22, 2020, 03:43:10 PM »
Coal production is approximately 10 times higher today than it was when the oil revolution began and people predicted the demise of coal.  Fluctuations the last 10 years are noise.

TomTX

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Re: Oil Investing
« Reply #76 on: October 22, 2020, 07:21:35 PM »
Coal production is approximately 10 times higher today than it was when the oil revolution began and people predicted the demise of coal.  Fluctuations the last 10 years are noise.

What "people" made this prediction? Making vague claims that some handful of people out of billions made some prediction isn't very compelling.

Oil is not an obvious substitute for coal usage, especially early in the oil era.  Natural gas to some extent displaced coal use (replacing "town gas" of CO + H2 synthesized from coal).

In contrast the BEV is a direct displacement of oil usage at nearly a 1:1 ratio.

MustacheAndaHalf

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Re: Oil Investing
« Reply #77 on: October 23, 2020, 11:36:44 AM »
TomTX - Did you ignore the start of this thread entirely?  I said I'm investing for Covid recovery in the very first post, when I created this thread.  That shouldn't be a surprise, nor should it require insults and suggestions I leave the thread which I created.  If you don't like my topic, you are free to create your own.

norajean - It's a thread about oil investing, not coal.

PaulMaxine - But to get back to oil consumption, here's links showing rising oil consumption:

"world consumption", by a .gov website, showing increases since 2015:
https://www.eia.gov/outlooks/steo/report/global_oil.php

"World Consumption of Oil", showing annual increases since the 1980s:
https://www.worldometers.info/oil/

"World oil supply and demand" showing rising demand since the 1980s:
https://www.iea.org/reports/oil-information-overview

MustacheAndaHalf

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Re: Oil Investing
« Reply #78 on: October 23, 2020, 11:47:41 AM »
Here's how I ended the first post in this thread:
I suppose the question is after corona virus (whenever that is), should I hang on to oil stocks / options or cash out?

My investments were originally a mix of stocks and options, but are now 100% options.  Options have an expiration date, so I need to decide if I hold those options after a recovery or sell them.  Projections for a Covid-19 recovery range from mid-2021 to early 2022, which assumes vaccines and treatments are mass produced and have a significant impact.

Here's the upcoming events where I expect to make a decision to sell or not:
* first vaccine succeeds in phase III trials, and efficiency is known
* a vaccine with 50%+ effectiveness gets FDA approval
* production and delivery of vaccines - better than expected?  slower?
* willingness to get vaccinated (10% anti-vax, higher distrust of new vaccine)
* reopening of economy as vaccines roll out

I believe most people overestimate vaccine effectiveness.  That suggests the first successful vaccine will be met with excessive optimism.  So maybe that's one decision point.

Polls show unwillingness to take the vaccine - but that's with current information.  The high priority group includes doctors, who will get vaccinated (since they're at higher risk) before the general population.  That means people can ask their doctor about the vaccine, and most doctors can honestly say they had the vaccine already.  Current estimates of participation (50%?) are likely a gross under-estimate.  Maybe it's worth waiting for this point, before selling.






TomTX

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Re: Oil Investing
« Reply #79 on: October 23, 2020, 03:47:14 PM »
TomTX - <snip> If you don't like my topic, you are free to create your own.

And if you don't like the direction the thread has taken, you are free to leave. You do not own the discussion because you started the thread.

Facepunches are a way of life around here. If you get insulted, it's your own problem.

Gambling on the oil industry is... gambling. Betting on short-term moves is not investing. You may win short-term, but the odds are against you - especially as someone new to the field.

MustacheAndaHalf

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Re: Oil Investing
« Reply #80 on: October 24, 2020, 01:03:39 AM »
TomTX - You mean the direction you hijacked the thread towards?  You brought up Tesla, when it wasn't relevant to investing in oil until a Covid recovery.  You're the one bringing up the future decades of oil.  The "thread" hasn't taken a new direction - you have.  Look at the discussion before you showed up, for example.

Someone selling their investments within 2 years doesn't need to consider the 20 year picture.  I won't be investing in oil over the time frames you've mentioned.  Which brings me to your main debate style - insulting me as "dumb" and labeling actions as "gambling" without backing up your points with any information or detail.  If you only throw insults, that's not a facepunch, that's just insulting people.

Like my recent post, why is investing in oil stock options until a Covid recovery considered a bad move?

The time frame is less than 2 years, so the situation 20 years from now isn't relevant.  What's relevant is how much Covid recovery will impact oil stocks.  I claim those companies will see revenues return to normal, and their stock price will return to normal as a result.

norajean

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Re: Oil Investing
« Reply #81 on: October 24, 2020, 05:28:15 AM »
One of the bigger clues that oil company stocks are going to be lower for longer is the unprecedented cuts announced by Exxon. The company is perennially long range and can weather most downturns. Two years is nothing for them; they could fund the dividend from debt for much longer. They are investing in huge long term projects now. For them to accept the market has changed forever and start cutting is very telling. A vaccine will slowly restore partial demand over perhaps five years. Then the industry is back to the shale oil oversupply situation which preceded the virus. Alternative energy doesnít threaten oil and gas, but the perception it could dampens the stock values even when profits are high.

TomTX

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Re: Oil Investing
« Reply #82 on: October 24, 2020, 05:33:49 AM »
You know, I'd let it slide if you weren't lying about what I posted.

I suppose you could be so misinformed that you think calling an action dumb is the same thing as calling a person dumb. 

So which is it? Deliberate lying or unable to parse the difference?

PaulMaxime

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Re: Oil Investing
« Reply #83 on: October 24, 2020, 10:19:22 AM »
One of the bigger clues that oil company stocks are going to be lower for longer is the unprecedented cuts announced by Exxon. The company is perennially long range and can weather most downturns. Two years is nothing for them; they could fund the dividend from debt for much longer. They are investing in huge long term projects now. For them to accept the market has changed forever and start cutting is very telling. A vaccine will slowly restore partial demand over perhaps five years. Then the industry is back to the shale oil oversupply situation which preceded the virus. Alternative energy doesnít threaten oil and gas, but the perception it could dampens the stock values even when profits are high.

XOM getting removed from the Dow was a pretty big deal, IMHO. Their stock peaked in 2014 and has been dropping significantly since then.

In my opinion the energy system is in transition and we are going to see more disruption.

Solar energy is the now cheapest form of electricity. More and more energy supply is coming on line in different forms: Wind, Solar, etc.  It seems that the laws of supply and demand mean that more availability of energy would lead to lower prices over time.


TomTX

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Re: Oil Investing
« Reply #84 on: October 24, 2020, 04:27:56 PM »
One of the bigger clues that oil company stocks are going to be lower for longer is the unprecedented cuts announced by Exxon. The company is perennially long range and can weather most downturns. Two years is nothing for them; they could fund the dividend from debt for much longer. They are investing in huge long term projects now. For them to accept the market has changed forever and start cutting is very telling. A vaccine will slowly restore partial demand over perhaps five years. Then the industry is back to the shale oil oversupply situation which preceded the virus. Alternative energy doesnít threaten oil and gas, but the perception it could dampens the stock values even when profits are high.

XOM getting removed from the Dow was a pretty big deal, IMHO. Their stock peaked in 2014 and has been dropping significantly since then.

In my opinion the energy system is in transition and we are going to see more disruption.

Solar energy is the now cheapest form of electricity. More and more energy supply is coming on line in different forms: Wind, Solar, etc.  It seems that the laws of supply and demand mean that more availability of energy would lead to lower prices over time.
Yes, and that transition looks like it is about to accelerate. Texas (ERCOT) has a grid with annual peak demand around 75GW. There's already ~25GW of wind and ~3GW of solar on the grid. However, if you look at projects applying for approval/construction with ERCOT, there's another 24GW of wind and 77GW of solar in the pipeline, plus 18GW of storage (mostly batteries, and mostly in conjunction with a wind or solar project) with some pretty large completions scheduled for 2021 and 2022.

This doesn't directly affect oil per se, but it will significantly undercut XOM and other "oil majors" because they are in the oil and gas industry. Most wells in Texas produce both. These moves will significantly undercut gas usage.

Note this is just an example: Wind, solar and batteries are now cheap enough for widespread deployment over the next few years - and faster if the Democrats take the Presidency and Senate (which looks 75% probable) - have a look at Biden's climate plan. It does not bode well for the oil and gas industry.

Edit: Looked up the actual ERCOT numbers as of end-of-September, tweaked above to be more precise.
« Last Edit: October 24, 2020, 04:35:59 PM by TomTX »

norajean

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Re: Oil Investing
« Reply #85 on: October 24, 2020, 06:27:13 PM »
One of the bigger clues that oil company stocks are going to be lower for longer is the unprecedented cuts announced by Exxon. The company is perennially long range and can weather most downturns. Two years is nothing for them; they could fund the dividend from debt for much longer. They are investing in huge long term projects now. For them to accept the market has changed forever and start cutting is very telling. A vaccine will slowly restore partial demand over perhaps five years. Then the industry is back to the shale oil oversupply situation which preceded the virus. Alternative energy doesnít threaten oil and gas, but the perception it could dampens the stock values even when profits are high.

XOM getting removed from the Dow was a pretty big deal, IMHO. Their stock peaked in 2014 and has been dropping significantly since then.

In my opinion the energy system is in transition and we are going to see more disruption.

Solar energy is the now cheapest form of electricity. More and more energy supply is coming on line in different forms: Wind, Solar, etc.  It seems that the laws of supply and demand mean that more availability of energy would lead to lower prices over time.
Yes, and that transition looks like it is about to accelerate. Texas (ERCOT) has a grid with annual peak demand around 75GW. There's already ~25GW of wind and ~3GW of solar on the grid. However, if you look at projects applying for approval/construction with ERCOT, there's another 24GW of wind and 77GW of solar in the pipeline, plus 18GW of storage (mostly batteries, and mostly in conjunction with a wind or solar project) with some pretty large completions scheduled for 2021 and 2022.

This doesn't directly affect oil per se, but it will significantly undercut XOM and other "oil majors" because they are in the oil and gas industry. Most wells in Texas produce both. These moves will significantly undercut gas usage.

Note this is just an example: Wind, solar and batteries are now cheap enough for widespread deployment over the next few years - and faster if the Democrats take the Presidency and Senate (which looks 75% probable) - have a look at Biden's climate plan. It does not bode well for the oil and gas industry.

Edit: Looked up the actual ERCOT numbers as of end-of-September, tweaked above to be more precise.

Gas prices in Texas are already so low as to be negligible and even negative in some instances (producers paying for gas disposal because it is cheaper than the flare fine).  This doesn't particularly affect oil producers as they are after the oil value - the gas is a by product which they are happy to sell or otherwise dispose of.  West African producers have been flaring 100% of their gas for decades. Not good for the environment.

MustacheAndaHalf

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Re: Oil Investing
« Reply #86 on: October 25, 2020, 10:33:25 AM »
One of the bigger clues that oil company stocks are going to be lower for longer is the unprecedented cuts announced by Exxon. The company is perennially long range and can weather most downturns. Two years is nothing for them; they could fund the dividend from debt for much longer. They are investing in huge long term projects now. For them to accept the market has changed forever and start cutting is very telling. A vaccine will slowly restore partial demand over perhaps five years. Then the industry is back to the shale oil oversupply situation which preceded the virus. Alternative energy doesnít threaten oil and gas, but the perception it could dampens the stock values even when profits are high.
You're saying this is like "most downturns", but then offering a historic drop in demand for 5 years.  Both of those can't be true.

To make sure we're referring to the same information, here's an article about Exxon's recent cuts:

"Exxon Mobil Corp XOM.N on Tuesday throttled back investment in shale, natural gas and deep water production, cutting planned capital spending by 30% this year as the coronavirus pandemic saps energy demand and oil prices tumble."
"ďWe havenít seen anything like what weíre experiencing today,Ē Exxon Chief Executive Darren Woods said on Tuesday as he detailed spending cuts on a conference call."
https://www.reuters.com/article/us-global-oil-exxon-mobil-idUSKBN21P1II

The coronavirus pandemic is not most downturns: the Exxon CEO hasn't seen anything like it.

Another explanation is when "oil prices tumble", Exxon needs to adapt, and did so by "cutting planned capital spending by 30%".  If the article is accurate, that would indicate Exxon is simply reacting to new oil prices rather than predicting 5 years of low demand.

One of the links I referenced earlier predicts that demand will return to pre-pandemic levels near the end of 2021.  Where are you seeing a prediction of 5 years before a return to normal oil demand?
https://www.eia.gov/outlooks/steo/report/global_oil.php

MustacheAndaHalf

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Re: Oil Investing
« Reply #87 on: October 25, 2020, 10:36:12 AM »
TomTX - That's a false choice.  Two people called your post insulting, you just refuse to admit it.

BicycleB

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Re: Oil Investing
« Reply #88 on: October 25, 2020, 01:47:37 PM »
I suspect the exponential electric car purchases will have a big impact, but unclear whether the impact will be soon enough to deter price rises in the 1-2 year timeframe.

Curious about resolution of all this!

TomTX

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Re: Oil Investing
« Reply #89 on: October 25, 2020, 07:44:19 PM »
TomTX - That's a false choice.  Two people called your post insulting, you just refuse to admit it.

And yet you refuse to explain your false claim, which was the whole basis for claiming it was insulting.

Curious.

BicycleB

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Re: Oil Investing
« Reply #90 on: October 25, 2020, 11:05:43 PM »
Fwiw, after re-reading the posts of OP and TomTX:

To me it looks like honest discussion misunderstood, no need for offense.

OP wants to discuss his investing strategy, and feels TomTX is commenting on timeframes irrelevant to it, therefore on concerns (eg Tesla) that are irrelevant to it.

TomTX feels his concerns are quite relevant to OP's timeframe, that OP doesn't see it, and that seeing it would be helpful for OP. Right or wrong, the comment that ignoring the later timeframe is "dumb" is direct but honest commentary on OP's analysis, not a personal description of OP. It could have phrased more softly, but if OP wants comment (supposedly the purpose of the thread) he should accept it as it comes. From reading, it appears to me that TomTX has more experience in this area, so his comments should be valued. I have found them illuminating so far.

I may have missed a few posts (didn't see the ones about insulting), but as a reader, have found comments by both posters very informative in past. Anyway, I hope both stick around. Maybe it's mostly misunderstanding and calmness can descend.

***

On the merits, it seems that the long term future of oil could affect prices next year or even this year, which is in OP's timeframe, so discussing the effect of Tesla directly addresses whether to keep holding options in the next year or two. Maybe other investors are thinking about the same issue, so their thoughts affect the price? Would that make it relevant even if OP is sure to sell in 2 years?

More broadly, OP has the thesis that COVID details will affect oil prices in a way that might give predictable advantage, if I understand correctly. If experienced oil investors advance critiques that other factors will have bigger impact and that OP's investing theory is likely to be unreliable, that's a relevant comment, isn't it?

I like the fact that OP posts his actual positions, or significant examples thereof.

MustacheAndaHalf

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Re: Oil Investing
« Reply #91 on: October 26, 2020, 09:18:56 AM »
... maybe at some point that trend reverses, with a reversion to the mean.  I'm not saying that happens next month, but over the next couple years it seems more likely to happen.


...  reflected in oil prices.  Without predicting 5 years from now, what happens if oil demand recovers?


...  Buying an option like that which expires in Jan 20, 2023 costs 1/4th of the stock price right now.  If oil stocks go up +25% in 2.3 years, the option breaks even.


...  So oil demand has been growing every year for the past decade.  And second, the prediction for 2020 and 2021: negative growth in 2020, followed by catch up growth in 2021.
https://www.iea.org/reports/oil-2020


Since we're focusing on lying, how is this not a lie?
2) I'm talking about the upcoming decade (ie, 2020-2030) which is the timeframe specified by you. It appears you didn't do the simple calculation of growth I suggested.
Can you find the post(s) where I mentioned that time frame?  I provided numerous examples where it's not the case.  My guess is you won't reply with evidence.

We can debate about what some people think is insulting or not.  But to claim I said something very specific, when I didn't, is a much clearer case of you being wrong.  Do you have a quote to prove it?


TomTX

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Re: Oil Investing
« Reply #92 on: October 26, 2020, 11:38:48 AM »
I'm going to ignore the floundering above.

In more relevant news, I'm seeing multiple claims that Tesla will be able to produce 1M+ vehicles next year, not the 2022 I had earlier estimated.

Tesla announced in the 3Q investor information that Fremont production capacity has been upgraded to 500k/yr, the Model 3 phase of Shanghai Gigafactory is now capable of 250k/yr, and the Model Y phase of Shanghai Gigafactory will be online within a couple months, though it will take some time to ramp output there as well. We can expect another 250k/year from there. That pretty closely matches the ~180k 4Q production estimates, presuming Shangai Model Y production doesn't contribute much in 4Q, but will thereafter.

On top of that, both Austin and Berlin Gigafactories are expected to begin output next year (estimates vary for volume. Austin is supposed to do Model Y production first, but Cybertruck is also scheduled to be out in late 2021). Berlin is currently ahead of Austin.

Berlin is almost ready to start installing equipment, Austin has a lot of site prep and foundation work completed, including having large power poles up for connecting to the local grid.

Tesla has plenty of cash for accelerated construction, with $14.5B in cash, and significant FCF each quarter. Giga Shanghai Phase 1 (model 3) took less than a year from "muddy field" to "Finished customer cars coming off the assembly line"

I think that breaking 1M full-range electric vehicles/yr from a single manufacturer is going to be important psychologically for oil investors, fewer will try to handwave away the change which is coming.

MustacheAndaHalf

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Re: Oil Investing
« Reply #93 on: October 27, 2020, 10:38:45 AM »
That's what I expect when the facts don't support the false claim you made.

As I pointed out earlier, Tesla is irrelevant to oil investing in the short term.  Tesla impacts less than 1% of the world's vehicles, which itself is a fraction of worldwide oil demand.

ChpBstrd

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Re: Oil Investing
« Reply #94 on: October 27, 2020, 10:49:12 AM »
What happens when Nio, Xpeng, Li, Chery, Baojun, or one of a dozen Chinese startups steal Tesla's technology and flood the Chinese market with EVs? The world's most populous nation already has a 3.9% battery electric vehicle market share.

norajean

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Re: Oil Investing
« Reply #95 on: October 27, 2020, 12:10:26 PM »
What happens when Nio, Xpeng, Li, Chery, Baojun, or one of a dozen Chinese startups steal Tesla's technology and flood the Chinese market with EVs? The world's most populous nation already has a 3.9% battery electric vehicle market share.

In your scenario, most likely Chinaís rapid and constant increase in oil consumption the last 50 years slows a bit (but continues to increase), assuming the electricity source for those cars is not oil (most likely coal, a far dirtier energy source).

waltworks

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Re: Oil Investing
« Reply #96 on: October 27, 2020, 02:52:51 PM »
You can make a plausible case for all sorts of outcomes. That doesn't mean you can successfully invest based on your plausible theory. I've learned that several times now...

-W

TomTX

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Re: Oil Investing
« Reply #97 on: October 27, 2020, 08:10:22 PM »
That's what I expect when the facts don't support the false claim you made.

As I pointed out earlier, Tesla is irrelevant to oil investing in the short term.  Tesla impacts less than 1% of the world's vehicles, which itself is a fraction of worldwide oil demand.

Yeah, we can all tell you are super emotionally invested in your oil speculation.

Good luck with that!

MustacheAndaHalf

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Re: Oil Investing
« Reply #98 on: October 28, 2020, 07:48:35 AM »
That's what I expect when the facts don't support the false claim you made.

As I pointed out earlier, Tesla is irrelevant to oil investing in the short term.  Tesla impacts less than 1% of the world's vehicles, which itself is a fraction of worldwide oil demand.
Yeah, we can all tell you are super emotionally invested in your oil speculation.

Good luck with that!
"we"?  You're one person.  When I post facts, rather than post facts of your own, you attack the messenger.  You don't know someone else's emotions, so you pretend to know them to attack someone else's motivation - because again, you can't counter the facts I've posted.

So who is more emotional: someone posting facts, or someone making character attacks?


ChpBstrd - For purposes of oil consumption, it doesn't really matter if Tesla or Nio makes the electric vehicle.  Both electric cars would take the place of a vehicle that consumes gas.

waltworks - Index fund performance during a crisis is a more limited data set.  Active funds have beaten index funds in the most recent crisis or two, but there isn't enough data.  You could certainly ignore every crisis and keep passively investing, which historically has won out over long time frames.

ChpBstrd

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Re: Oil Investing
« Reply #99 on: October 28, 2020, 10:34:00 AM »
ChpBstrd - For purposes of oil consumption, it doesn't really matter if Tesla or Nio makes the electric vehicle.  Both electric cars would take the place of a vehicle that consumes gas.

Ah, I forgot to state my conclusion, and assumed it instead. That was bad writing on my part.

Conclusion:
If dozens of automakers can quickly ramp up to anywhere close to Tesla's level of manufacturing competence, then the overall supply of electric cars could increase much faster than has been possible in the past. E.g. 30 factories could be build/reconfigured at a time each year instead of the current 3-5. Tesla investors have already funded much of the R&D that has lowered the price of BEVs from 150k to 100k to 40k and, coming soon, 25k. There is no remaining technical or economic barrier to prevent China's massive manufacturing capacity from being activated to produce these vehicles at scale within a couple of years.

It's easy to dismiss the Chinese EV companies as poor-quality junk merchants, but people made the same mistake about Japanese motorcycle makers in the 1960s, and then again about Japanese car makers in the 1970s, and then about Japanese electronics makers in the 1980s, and then yet again about the Chinese competitors to Japanese electronics makers in the 1990's to 2000's. People also dismissed digital photography in the early 90's because the products sucked, but that transition was complete in just 5 years (and Chinese manufacturers played a big role).