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Oil Needs to Fall Below $20 to Compete With Green Alternatives

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Re: Oil Needs to Fall Below $20 to Compete With Green Alternatives

#51

Post by ThomPete »

JumpCrisscross wrote: post #20
ThomPete wrote: post #19

Earlier quoted context omitted.

For oil the cost of extraction isnt as simple as you seem to imply. The diversity of what oil can be used for and the value of those things, far exceed to the cost of extracting it. No other material is as valuable and diverse as oil.

> The diversity of what oil can be used for and the value of those things, far exceed to the cost of extracting it This is a statement about demand, not cost. Nobody is saying oil is going to zero. And the cost curve for oil production varies greatly from well to well. Many wells are already extracting at total costs above price.

The cost needs to be divided out on other things than just for energy, thats the point.

Re: Oil Needs to Fall Below $20 to Compete With Green Alternatives

#52

Post by hdfbdtbcdg »

perfunctory wrote: post #45
thiago_fm wrote: post #27

What people need to have in mind is that oil, when compared with solar/wind power, acts both as a storage for energy(battery) and also the power/energy itself. So that means, you need a battery. The price of the battery, its decay and so on, has to be taken into account in that price. Does that aforementioned price for the barrel of oil includes that? I think not. If everybody would go electric Today, the price of a…

> I believe consumers will still buy cars powered by oil as long as it is worth it. As long as it is legal https://en.wikipedia.org/wiki/Phase-out_of_fossil_fuel_vehic...

I hope that countries follow through but I fear that these commitments will be ignored. For democracies any plans past the next election should be seen as aspirations rather than plans.

Re: Oil Needs to Fall Below $20 to Compete With Green Alternatives

#53

Post by dsfyu404ed »

Brakenshire wrote: post #43
runeks wrote: post #30

Earlier quoted context omitted.

> Under a scenario of total road transport electrification [...] I think 30-year oil investments are relatively safe if this is their threat. I can’t see this happening in less than 30 years.

I’d say personally total electrification won’t happen for a long time, if ever, but there will be major markets, notably China and the EU, which are substantially electrified over a 30 year timescale. You also have to bear in mind that electrification is most attractive for vehicles which travel the most distance, and consume the most fuel. Even 20% electrification of the fleet will have a massively outsized impact o…

Taxis and buses will be electrified quickly because it makes a lot of sense

As long as OTR trucking's primary regulatory irritants are weight and working hours it will resist electrification (unless electric somehow magically becomes so dirt cheap to run that it makes up for the limitations).

Re: Oil Needs to Fall Below $20 to Compete With Green Alternatives

#54

Post by Brakenshire »

navigatesol wrote: post #44
Brakenshire wrote: post #15

The worry is that oil companies are making investments now for 10, 20 or 30 years into the future and not taking into account the realities of making a return. There are all sorts of long term capital costs for setting up oil fields, refineries, pipelines and so on, and then marginal costs for each barrel thereafter. Under a scenario of total road transport electrification, demand would be drastically reduced, meanin…

> The worry is that oil companies are making investments now for 10, 20 or 30 years into the future and not taking into account the realities of making a return. Do you really believe that hundred-year-old companies aren't planning their future? Sure, some companies will fail (they always do), but others adapt. Every oil company is well aware of the effects and politics of climate change, and most have massive renewa…

You could say that about any incumbent industry player faced with a disruptive challenger, it’s surprising to see this sentiment on Hacker News of all places.

My comment was about the investments, not the companies. Some oil companies have significant investments in electricity grids, electric vehicle charging, renewable generation etc, and some do not. Even if they do, it’s not obvious they are best placed to be competitive in those industries or sustain the same profits, although hopefully they can do well. BP made a big investment in solar which it gave up on, now they are investing in charging infrastructure, hopefully that will turn out better.

Re: Oil Needs to Fall Below $20 to Compete With Green Alternatives

#55

Post by tristanperry »

tim333 wrote: post #48

In the UK we have large taxes on oil as fuel (57.95 p duty + ~ 20p VAT on a litre), large subsidies for renewables, oil prices up to $80/barrel and still most people drive petrol or diesel vehicles.

Sure, and whilst this is _slowly_ changing, a large part is the high up-front cost.

A Kia e-Niro is £32,995 (including the recently cut Government subsidy) whilst a similar size+spec petrol car (The Kia Rio 3) is £17,285.

The Nissan Leaf is from £27,995 whilst the larger Qashqai is from £19,995.

I know that the up-front cost issue is similar in many countries, but that's where Government subsidies usually kick in. America has the $7,500 federal tax credit on EVs (to a point), plus state subsidies sometimes top it up to $10k. This compares to the UK which has recently cut the £4,500 subsidy down to £3,500 for EVs.

Re: Oil Needs to Fall Below $20 to Compete With Green Alternatives

#56

Post by Brakenshire »

romaaeterna wrote: post #46
Brakenshire wrote: post #26

Earlier quoted context omitted.

The report is comparing petrol/diesel against solar/wind plus batteries specifically in the context of road transport.

See my reply to gnode. But clearly solar/wind should not have been mentioned at all. They are talking about competing with grid electricity in that case, and making a very unlikely argument.

Your argument is about today, but the analysis is about 25 years time, i.e. the scale of long term oil investments.

Re: Oil Needs to Fall Below $20 to Compete With Green Alternatives

#57

Post by sseveran »

Brakenshire wrote: post #15

The worry is that oil companies are making investments now for 10, 20 or 30 years into the future and not taking into account the realities of making a return. There are all sorts of long term capital costs for setting up oil fields, refineries, pipelines and so on, and then marginal costs for each barrel thereafter. Under a scenario of total road transport electrification, demand would be drastically reduced, meanin…

Maybe this will come to pass but the market currently does not believe so, at least in the 10 year time frame. A 2030 Oil Futures Contract is priced right around $54 this morning. If we end up in a world where oil is no longer needed, yes some people will lose a bunch of money. But capital is also going to be freed up to invest in new things.

I don't think that anyone thinks the oil industry is the same as 50 years ago. I also don't think there is anyone (on the professional side at least) who does not know that oil companies, specifically the majors, trade with the price of oil. If these are actually unsafe stocks then there is a huge amount of money to be made by betting against them in a variety of ways. I actually don't think it will be as catastrophic as you think since in an such an environment a lot of oil companies in the US would go out of business, or be substantially reorganized. The prices of certain things would increase and maybe alternatives would arise.

If in 30 years we are going to need substantially less oil than we do today, in 10 years we should be starting to see that reflected in the price. So if you really believe that you should be selling long dated futures contracts, or shorting major oil company stocks, or shorting companies specializing in oil transportation, or probably a variety of other things.

Re: Oil Needs to Fall Below $20 to Compete With Green Alternatives

#58

Post by mamon »

navigatesol wrote: post #49
mamon wrote: post #42

Earlier quoted context omitted.

>> Yes you can argue that the Iraq War was done for oil, it's just not a strong argument. If it wasn't for oil, then for what? Those chemical weapons that were never found? All wars that US starts (and 80 percent of all wars in the world are started by US) are either for oil, or other economic interests. "Spreading democracy" is just an excuse used by government's public relations division, but it is not even remotel…

> If it wasn't for oil, then for what? Those chemical weapons that were never found? You have a pretty simplified political view, my friend. Iraq sells oil into a market; how did invading them "get us the oil"?

Before the war US had to buy that oil at market price and all profits belonged to local companies (or to Russian ones, which also operated there). Since war American companies (Exxon Mobil) were granted licenses to extract oil from Iraq oil fields, and now the profits go to them. Not to mention that after Americans pretty much ruined the country, American companies make ton of money on re-building it from ruins. Pretty smart business model: bomb the country, and then charge it money for re-building it :)

Re: Oil Needs to Fall Below $20 to Compete With Green Alternatives

#60

Post by JumpCrisscross »

ThomPete wrote: post #51
JumpCrisscross wrote: post #20

Earlier quoted context omitted.

> The diversity of what oil can be used for and the value of those things, far exceed to the cost of extracting it This is a statement about demand, not cost. Nobody is saying oil is going to zero. And the cost curve for oil production varies greatly from well to well. Many wells are already extracting at total costs above price.

The cost needs to be divided out on other things than just for energy, thats the point.

> The cost needs to be divided out on other things than just for energy

A barrel which costs $50 to produce will cost $50 to produce regardless of its use. There is no "dividing out" costs.

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