Can we talk about the future of oil?

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Frugalbear
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Can we talk about the future of oil?

Post by Frugalbear »

Met a friend tonight for drinks and we were discussing oil stocks, Where it was, Where it is, and where it's going.


What are your thoughts?
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unclescrooge
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Re: Can we talk about the future of oil?

Post by unclescrooge »

EV will reduce the demand for oil.

Technology will increase the proven reserves of existing fields and thus the supply.

I think the long term trend for oil prices is not up.
000
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Re: Can we talk about the future of oil?

Post by 000 »

I think petroleum products will continue to be demanded for a long time and the Oil Companies will survive.

That is not to say their stock will outperform the index, but I would not have a problem investing some of my portfolio in their stock.

And of course I do through index funds.
case_of_ennui
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Re: Can we talk about the future of oil?

Post by case_of_ennui »

This is an interesting read

https://www.eia.gov/energyexplained/oil ... of-oil.php

The US Energy Information Administration projects that liquid fuels will make up 35% of total US energy consumption in 2050 compared with 37% in 2019. Also some stats about what % of petroleum in the US is used for fuels vs industrial usage such as making plastics. The page looks to have been updated in July of this year. Projections are only projections though.
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Re: Can we talk about the future of oil?

Post by brad.clarkston »

Oil isn't going anywhere until wind/solar capacity issues massively improves (look at CA blackouts) and they figure out a cheaper way to make plastic.

Plastic from something else will be the deathstroke.
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Re: Can we talk about the future of oil?

Post by runner3081 »

Crystal ball broken.
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firebirdparts
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Re: Can we talk about the future of oil?

Post by firebirdparts »

With the technology we have now, there's a lot more oil production available than we need, so the price should be range-bound for a while absent any bizarre political decision. If it goes to $50 a barrel they just drill more. If it goes to $25, they have to react to that also. In a sense, it's been this way for 100 years, but in another sense, we know more now. The well-owners should be somewhat limited in earnings growth, which is a bit odd. If you're buying and converting oil then the trends of the last 40 years would not be terribly different from today.
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jello_nailer
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Re: Can we talk about the future of oil?

Post by jello_nailer »

unclescrooge wrote: Wed Aug 26, 2020 9:30 pm EV will reduce the demand for oil.

Technology will increase the proven reserves of existing fields and thus the supply.

I think the long term trend for oil prices is not up.
Just the other day I sent out an article to a number of colleagues regarding the estimated future use of today's total global oil and gas reserves. Conclusion was a large percentage of today's, and future new reserves, WOULD NEVER BE TOUCHED. We have all we will ever need. Ouch, especially if you are XOM or CVX. I will try and find the article and then post it.

So much for peak oil.

Or if you're like me and in process control and 70% of your market is midstream and downstream, ouch ouch. Thankfully, I'm prolly a year out...
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Re: Can we talk about the future of oil?

Post by willthrill81 »

I recall Theodore Levitt's famous article titled "Marketing Myopia" where he discussed the coming death of oil.

The trouble is, he wrote that back in 1960.

He was right about the very long term outlook for oil, but he got the specific timeline wrong. And that's the trouble with these sorts of predictions. You can be right in the end but so wrong in the intervening period that you lose your shirt.
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Re: Can we talk about the future of oil?

Post by bottlecap »

My thought is that I'm more interested in what y'all had for drinks.

JT
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unclescrooge
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Re: Can we talk about the future of oil?

Post by unclescrooge »

jello_nailer wrote: Wed Aug 26, 2020 10:18 pm
unclescrooge wrote: Wed Aug 26, 2020 9:30 pm EV will reduce the demand for oil.

Technology will increase the proven reserves of existing fields and thus the supply.

I think the long term trend for oil prices is not up.
Just the other day I sent out an article to a number of colleagues regarding the estimated future use of today's total global oil and gas reserves. Conclusion was a large percentage of today's, and future new reserves, WOULD NEVER BE TOUCHED. We have all we will ever need. Ouch, especially if you are XOM or CVX. I will try and find the article and then post it.

So much for peak oil.

Or if you're like me and in process control and 70% of your market is midstream and downstream, ouch ouch. Thankfully, I'm prolly a year out...
I remember reading the book called Peak Oil in 2006 or 2007. Unlike the real estate book Are You Missing The Coming Real Estate Boom?, it was well written and quite believable. But alas, technology kills the profit margins for all businesses.
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Re: Can we talk about the future of oil?

Post by flaccidsteele »

Frugalbear wrote: Wed Aug 26, 2020 9:17 pm Met a friend tonight for drinks and we were discussing oil stocks, Where it was, Where it is, and where it's going.

What are your thoughts?
What did you guys have for drinks? Single malts?
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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Frugalbear
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Re: Can we talk about the future of oil?

Post by Frugalbear »

flaccidsteele wrote: Wed Aug 26, 2020 11:16 pm
Frugalbear wrote: Wed Aug 26, 2020 9:17 pm Met a friend tonight for drinks and we were discussing oil stocks, Where it was, Where it is, and where it's going.

What are your thoughts?
What did you guys have for drinks? Single malts?
Manhattan's- straight up, bulleit, extra bitters
Valuethinker
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Re: Can we talk about the future of oil?

Post by Valuethinker »

https://www.bp.com/content/dam/bp/busin ... r-dale.pdf

worth reading.

The supply of oil was traditionally price inelastic. It takes billions of dollars and years to discover a new field, negotiate for mineral rights, and drill. Read Daniel Yergin's second book about oil (always read The Prize before reading anything else about oil) - how long the Caspian Sea took. As a result there are/ were huge swings in oil prices, reflecting temporary oversupply (when demand fell for economic or other reasons) and undersupply - takes years to fill the gap.

It was always the case that we could only extract 30-40% of the oil Resource that was present in an oil reservoir.

Hence it looked in the early 2000s like oil production would not meet oil consumption, particularly China's ever increasing demand. Prices rose to the highest levels, inflation adjusted, since the Iran Crisis of 1979-80. Interestingly the effect on the world economy was not an instant recession which one would have expected based on the 1973 & 79 experiences (and, briefly, 1990). That is the difference between a demand shock (China especially in 2008) vs a supply shock (1973 & 1979-80) i.e. an actual reduction in the available supply of oil.

Ken Deffyes, professor of Geology at Princeton, wrote "Hubbert's Peak". Sites like TheOilDrum became extremely popular.

What has changed since then is fracking. The US fracking industry has proven that there's no such thing as a tapped out reservoir. Or rather, oil which was previously inextractible or uneconomic to produce, is now economic. If the price is high enough, then the oil is produced.

Oil is now much more like an agricultural commodity- big swings in prices have a much more immediate effect on supply. It's not the world's most expensive-to-extract oil which fills the gap (i.e. Canadian tar sands, deep offshore deposits like Brazil) it's small scale frackers.

You will still get demand and supply shocks. Covid-19 on the demand side (world oil demand fell something like 40% for about 6 weeks), a war in the Middle East would be a big supply shock. But the actual market will react faster to bring supply & demand back into balance. Oil fell to below 0, briefing, (at the Cushing OK hub), but is now back in the $40s after production cuts which were said to physically damage Russia's ability to produce.

What we are going to see is a plateauing of oil demand. Some analysts think it has already happened, but it is almost certain to happen by the mid 2030s. By that time many (all?) European nations will have banned the sale of new ICE consumer vehicles. Likely Japan will have fallen suit, and there are a number of other countries which could (including, by then, China).

As a petrochemical feedstock, my impression is that natural gas is still the leader, and the US with its cheap natural gas prices (likely essentially forever) is the leader in that-- again, fracking.

Oil demand is likely to plateau, say from the mid 2030s, and begin a long slow decline.

At least at the moment, there is no non-oil solution in prospect for long distance air travel. Hydrogen just lacks enough energy density.

Except for chemical industry uses, I don't see much oil consumption post 2050s. I expect that things will be far too desperate by then.

The Saudis clearly see this, because they are selling off part of the state owned oil company, Saudi Aramco, the world's largest oil company. They are trading oil revenues in the future for money now. Aramco pays a dividend so there is a genuine long term loss of income to the Saudi state in doing this.

I encourage everyone with an interest in this to read Burnout: the end game for fossil fuels by the respected energy economist, Professor Dieter Helm. He's careful not to make exact predictions of timeline, but his overview of what will happen to oil producing countries & companies is very intelligent.

https://www.amazon.com/Dieter-Helm/dp/0 ... ieter+Helm
Chuck107
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Re: Can we talk about the future of oil?

Post by Chuck107 »

Until infrastructure is in place or close to it, and a realistic method of producing enough electricity is accepted and being implemented world wide, I don't see Oil going away in our lifetimes.
As electric starts in it's infancy for transportation, Oil will cut back on new technologies and exploration as future profits from such won't be cost effective.

Military forces around the world will still rely on oil.
I don't see them using extension cords to "refuel" with electric on the battlefield.

Eventually Oil prices will stabilize as production wanes and be less of a trading venue.

My guesses, good as any I suppose.
Alas, I find moderation of this forum too restrictive for my tastes, farewell.
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Re: Can we talk about the future of oil?

Post by Jack FFR1846 »

Perhaps oil itself will see a very slight decline, but fossil fuels will not. Where do you think EV charging energy comes from? I guess the answer depends where you live, but it's likely either coal or natural gas. There is hydro, PV and wind, which are a small part, but burning dinosaurs will still be the major source even if ICE vehicles were outlawed.

I don't know the complications, but I know that plenty of landfills are fitted with pipes and collection means to gather methane. My understanding is that it's mostly just burned off. Not sure if this could be a new form of energy or how much it would contribute to the overall usage. I suppose it could be like ethanol in gasoline. Only government requirements would make the use of methane become practical.

Oil companies? I think they all have a hand in PV, wind and other renewable technologies and companies like XOM and CVX are going to do just fine.

The 2 things that will push EVs are government regulation/money and the cost of electricity vs gas. I know that most people don't want to be bothered with the manufactured spending-like shenanigans I go through, but with the gas discounts I create, my gas car costs far less than any Tesla or Leaf per mile to run.
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columbia
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Re: Can we talk about the future of oil?

Post by columbia »

brad.clarkston wrote: Wed Aug 26, 2020 9:39 pm Oil isn't going anywhere until wind/solar capacity issues massively improves (look at CA blackouts) and they figure out a cheaper way to make plastic.

Plastic from something else will be the deathstroke.

Human beings are kind of smart, so I presume that there will be a breakthrough in the economic feasibility of bioplastics.
(Having said, I've thought that for nearly 40 years about hydrogen as a fuel....)
asif408
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Re: Can we talk about the future of oil?

Post by asif408 »

To bring this to something actionable, OP, I don't know where oil stocks are going, but you can be sure the oil companies will evolve and adapt to new modes of energy and find ways to profit from them, so as long as you aren't investing in oil itself and investing in energy companies, those energy companies should do fine over the long term. The ones that don't will fall out of the index and the survivors will provide the profits. Maybe the energy index of the future will have fewer oil companies, but you can be sure there will companies that provide energy in some form making a profit. Another good reason to index.
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Re: Can we talk about the future of oil?

Post by CyclingDuo »

Frugalbear wrote: Wed Aug 26, 2020 9:17 pm Met a friend tonight for drinks and we were discussing oil stocks, Where it was, Where it is, and where it's going.

What are your thoughts?
Hope the drinks and discussion were all enjoyable.

:sharebeer

After at least one drink, I would start discussing some things such as...

There are over 1 Billion fossil fuel burning transportation vehicles operating in the world today (cars and freight vehicles represent 49.3% of global fuel consumption).

54,000 merchant ships and a total of 90,000 vessels crossing the seas on a daily basis that are burning fossil fuels in the world today (represents 6.3% of global fuel consumption).

39,000 commercial and military planes in the world (represents 7.8% of global fuel consumption).

30 Million recreational boats in the world.

Lawnmowers, garden equipment, petrol burning tools (edgers, weed trimmers, leaf blowers, chainsaws, generators, etc...).

Farm equipment including tractors, combines, sprayers, etc... .

ATV's, Motorcycles, mopeds, scooters, jet skis, snowmobiles, gas powered golf carts.

Construction backhoes, cranes, plows, graders, pavers, compactors, bulldozers, excavators, dump trucks, etc... .

Garbage trucks, snow plows, snowcats for ski resorts etc... .

Trains.

And the list doesn't touch it all.

Seems like a rather entrenched number of items that are not going to be easily replaced throughout the globe in the near term, or intermediate term. Perhaps I am more contrarian when it comes to pronouncing the death of oil and fossil fuels when it comes to current number of items that burn fuel now and what it would take, and how long it would take for all of that to change in the coming years/decades. That's not to say there are not difficult strategies for management to control in the industry, but just from a standpoint of where the hockey puck is in the overall market today and where that puck will be a few years from now, I find it hard to overlook some of the "oil" stocks when they are knocked down and presumed "out" during a bottoming process (even kicked one of 'em out of the DJIA and threw a hurricane or two at some of them on top of the Covid downturn, dividends cut or suspended, 401k matches suspended) - at least if one were in the "buy low, sell high" camp.

For an index fund investor - I own 'em all. Individual stocks within the sector, or a sector ETF - who knows? Exxon, Chevron, BP, Royal Dutch Shell, Occidental, Conoco Phillips, Marathon, Noble, Valero, Apache, Devon, Hess, Halliburton, Diamondback, Chesapeake, etc.... - it almost looks like a starting line up full of injured players for the last place team in the NBA that's delivered the season everyone just wants to forget. Season tickets and single tickets are on sale and maybe some of those players will recover from their injuries enough to score a basket or two and win a few games. Maybe next season things will start to look better. Meanwhile, tickets for other teams in other sports are sold out and selling above face value.

CyclingDuo
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topper1296
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Re: Can we talk about the future of oil?

Post by topper1296 »

Frugalbear wrote: Wed Aug 26, 2020 11:24 pm
flaccidsteele wrote: Wed Aug 26, 2020 11:16 pm
Frugalbear wrote: Wed Aug 26, 2020 9:17 pm Met a friend tonight for drinks and we were discussing oil stocks, Where it was, Where it is, and where it's going.

What are your thoughts?
What did you guys have for drinks? Single malts?
Manhattan's- straight up, bulleit, extra bitters
Bulleit is my go to for an Old Fashioned.

Concerning the original question....my Magic 8 Ball is currently saying cannot predict now.
Helo80
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Re: Can we talk about the future of oil?

Post by Helo80 »

I think this thread will be locked as it's not actionable.

There will always be a demand for oil as it's used to make a ton of products, like plastic, that we use everyday. Aviation and maritime is not switching from oil anytime soon. I would like to see Elon make a cruise ship that can run on electricity. The closest we can get is nuclear powered.

Also, most of the developing world still needs fuel to power their cars.
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jason2459
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Re: Can we talk about the future of oil?

Post by jason2459 »

Helo80 wrote: Thu Aug 27, 2020 8:38 am I think this thread will be locked as it's not actionable.

There will always be a demand for oil as it's used to make a ton of products, like plastic, that we use everyday. Aviation and maritime is not switching from oil anytime soon. I would like to see Elon make a cruise ship that can run on electricity. The closest we can get is nuclear powered.

Also, most of the developing world still needs fuel to power their cars.
I think the best actionable thing to do would be to hold the energy sector by it's weight in the market. Total US and Total ex-US for me is the most assured way to get the returns provided by those companies. If they keep investing in renewables and grow then you will be involved in that as well.
Helo80
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Re: Can we talk about the future of oil?

Post by Helo80 »

jason2459 wrote: Thu Aug 27, 2020 8:43 am
Helo80 wrote: Thu Aug 27, 2020 8:38 am I think this thread will be locked as it's not actionable.

There will always be a demand for oil as it's used to make a ton of products, like plastic, that we use everyday. Aviation and maritime is not switching from oil anytime soon. I would like to see Elon make a cruise ship that can run on electricity. The closest we can get is nuclear powered.

Also, most of the developing world still needs fuel to power their cars.
I think the best actionable thing to do would be to hold the energy sector by it's weight in the market. Total US and Total ex-US for me is the most assured way to get the returns provided by those companies. If they keep investing in renewables and grow then you will be involved in that as well.
Yes, I agree. The energy sector is too hot/cold for my tastes. When it does well, it does very well. When it's a bust, it's hard times. I'd be more comfortable buying stuff like FAANG for long-term growth of money than the O&G majors.

Enron was the hottest thing around and you had people in Houston that had most of their retirement locked up in that company and their stock... and look what happened. Granted, they were doing extremely fraudulent things on the books, but the normal everyday folk got screwed.
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Re: Can we talk about the future of oil?

Post by Slacker »

Any investment in oil companies (outside of indices) should be short term.

Electric vehicles surely will supplant more and more demand as time goes on and the industrial capacity for battery production increases.
Oil will be around for a long time though for non personal transportation needs (shipping, airplanes, boats, plastics).

As electric vehicles gain greater market share, I'd remove investments from companies invested in recycling plastics (without an industrial and/or chemical breakthrough to drastically reduce costs and increase capability to make more than just HDPE, milk jugs and soda bottles). Cheap oil (because of less personal transport demand) results in plastics too cheap for recycling to be economically viable (unless a regulation requires it).


...just wanted to get in before the lock!
chrisam314
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Re: Can we talk about the future of oil?

Post by chrisam314 »

CyclingDuo wrote: Thu Aug 27, 2020 8:13 am
Frugalbear wrote: Wed Aug 26, 2020 9:17 pm Met a friend tonight for drinks and we were discussing oil stocks, Where it was, Where it is, and where it's going.

What are your thoughts?
Hope the drinks and discussion were all enjoyable.

:sharebeer

After at least one drink, I would start discussing some things such as...

There are over 1 Billion fossil fuel burning transportation vehicles operating in the world today (cars and freight vehicles represent 49.3% of global fuel consumption).

54,000 merchant ships and a total of 90,000 vessels crossing the seas on a daily basis that are burning fossil fuels in the world today (represents 6.3% of global fuel consumption).

39,000 commercial and military planes in the world (represents 7.8% of global fuel consumption).

30 Million recreational boats in the world.

Lawnmowers, garden equipment, petrol burning tools (edgers, weed trimmers, leaf blowers, chainsaws, generators, etc...).

Farm equipment including tractors, combines, sprayers, etc... .

ATV's, Motorcycles, mopeds, scooters, jet skis, snowmobiles, gas powered golf carts.

Construction backhoes, cranes, plows, graders, pavers, compactors, bulldozers, excavators, dump trucks, etc... .

Garbage trucks, snow plows, snowcats for ski resorts etc... .

Trains.

And the list doesn't touch it all.

Seems like a rather entrenched number of items that are not going to be easily replaced throughout the globe in the near term, or intermediate term. Perhaps I am more contrarian when it comes to pronouncing the death of oil and fossil fuels when it comes to current number of items that burn fuel now and what it would take, and how long it would take for all of that to change in the coming years/decades. That's not to say there are not difficult strategies for management to control in the industry, but just from a standpoint of where the hockey puck is in the overall market today and where that puck will be a few years from now, I find it hard to overlook some of the "oil" stocks when they are knocked down and presumed "out" during a bottoming process (even kicked one of 'em out of the DJIA and threw a hurricane or two at some of them on top of the Covid downturn, dividends cut or suspended, 401k matches suspended) - at least if one were in the "buy low, sell high" camp.

For an index fund investor - I own 'em all. Individual stocks within the sector, or a sector ETF - who knows? Exxon, Chevron, BP, Royal Dutch Shell, Occidental, Conoco Phillips, Marathon, Noble, Valero, Apache, Devon, Hess, Halliburton, Diamondback, Chesapeake, etc.... - it almost looks like a starting line up full of injured players for the last place team in the NBA that's delivered the season everyone just wants to forget. Season tickets and single tickets are on sale and maybe some of those players will recover from their injuries enough to score a basket or two and win a few games. Maybe next season things will start to look better. Meanwhile, tickets for other teams in other sports are sold out and selling above face value.

CyclingDuo
Yes, very well said. Pretty much every physical thing you come into contact with, from the carpet or hardwoods your standing on to the walls around you needed fossil fuels integrated into heavy industry to produce. I'm glad you brought up the nautical angle.

The EU talks a big game about banning ICE cars, great. No population growth there really to speak of. And if it helps you sleep better at night despite practically the entire value chain being based on fossil fuels, by all means. Maybe Germany will ban the manufacturing of AMG's and BMW M engines. Bet that will go over well.

But think about the developing world for a second. In Chile they started burning down Santiago when a very modest increase to incredibly subsidized subway fares was proposed. What do you think is going to happen when you ban sales of the Nissan Tilda? Most people in emerging markets live at or below the poverty line and depend heavily on Buses, cheap cars, and farm equipment to be productive.

If you're a middle class worker in an emerging market you're going to buy a 10-15 year old ICE engine and run it for another 20 years because thats all you can afford and it will get the job done. It would take a lifetime to save for an electric vehicle, if you could even find one.

The worlds population growth is not located in countries where most people have the luxury of letting rid of fossil fuel consumption in any meaningful way.
DoubleR
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Re: Can we talk about the future of oil?

Post by DoubleR »

Jack FFR1846 wrote: Thu Aug 27, 2020 7:11 am Perhaps oil itself will see a very slight decline, but fossil fuels will not. Where do you think EV charging energy comes from? I guess the answer depends where you live, but it's likely either coal or natural gas. There is hydro, PV and wind, which are a small part, but burning dinosaurs will still be the major source even if ICE vehicles were outlawed.

I don't know the complications, but I know that plenty of landfills are fitted with pipes and collection means to gather methane. My understanding is that it's mostly just burned off. Not sure if this could be a new form of energy or how much it would contribute to the overall usage. I suppose it could be like ethanol in gasoline. Only government requirements would make the use of methane become practical.

Oil companies? I think they all have a hand in PV, wind and other renewable technologies and companies like XOM and CVX are going to do just fine.

The 2 things that will push EVs are government regulation/money and the cost of electricity vs gas. I know that most people don't want to be bothered with the manufactured spending-like shenanigans I go through, but with the gas discounts I create, my gas car costs far less than any Tesla or Leaf per mile to run.
I look at the electric grid daily for a rather large utility and until they improve solar and battery capacity, Natural Gas, Nuclear and Hydro will continue to be where most power comes from.
Solar takes up WAY to much space for the small amount of power they produce and right now these utilities use them as a way of saying a certain percentage of the portfolio comes from "renewable energy".
In other words they look good on paper but dont do enough for the grid and are at the mercy of the weather. Im sure out west they perform better.
Xrayman69
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Re: Can we talk about the future of oil?

Post by Xrayman69 »

Went to the gas station yesterday for the first time in nearly 2 months. Even before the pandemic my gas costs was probably at the level it was 20 years ago.

Margins for the oil producers are decreasing, barriers to entry decreasing and alternative competition is increasing. The moat is non existent. As a dividend play it is also no longer considered safe. XOM has a dividend yield nearly 9%. The price of the stock would have to double to make the yield appear reasonable. Thus the dividend is likely to be cut, just like it was cut out of the Dow. The Dow as a representation for the market is antiquated fans late in adding companies but its generally pretty good about companies that are removed. XOM largest market cap no to long ago, now less than TSLA (irony).

Oil will still play a dominant role is people’s everyday energy needs. However, the market is forward looking and look ahead it is unlikely to be a greater percentage in the years to come than it is today, thus the lower P/E.
Valuethinker
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Re: Can we talk about the future of oil?

Post by Valuethinker »

DoubleR wrote: Thu Aug 27, 2020 7:16 pm
Jack FFR1846 wrote: Thu Aug 27, 2020 7:11 am Perhaps oil itself will see a very slight decline, but fossil fuels will not. Where do you think EV charging energy comes from? I guess the answer depends where you live, but it's likely either coal or natural gas. There is hydro, PV and wind, which are a small part, but burning dinosaurs will still be the major source even if ICE vehicles were outlawed.

I don't know the complications, but I know that plenty of landfills are fitted with pipes and collection means to gather methane. My understanding is that it's mostly just burned off. Not sure if this could be a new form of energy or how much it would contribute to the overall usage. I suppose it could be like ethanol in gasoline. Only government requirements would make the use of methane become practical.

Oil companies? I think they all have a hand in PV, wind and other renewable technologies and companies like XOM and CVX are going to do just fine.

The 2 things that will push EVs are government regulation/money and the cost of electricity vs gas. I know that most people don't want to be bothered with the manufactured spending-like shenanigans I go through, but with the gas discounts I create, my gas car costs far less than any Tesla or Leaf per mile to run.
I look at the electric grid daily for a rather large utility and until they improve solar and battery capacity, Natural Gas, Nuclear and Hydro will continue to be where most power comes from.

Solar takes up WAY to much space for the small amount of power they produce and right now these utilities use them as a way of saying a certain percentage of the portfolio comes from "renewable energy".
North America of all places has plenty of land. Since you can still farm under solar panels and wind turbines, you haven't even "used" the land. Solar panels can also be situated on buildings. Right now wind is c 3x solar, but that will change. Both wind and solar are now the cheapest forms of new electricity generation, even cheaper than gas.
In other words they look good on paper but dont do enough for the grid and are at the mercy of the weather. Im sure out west they perform better.
on the East Coast there is offshore wind as well. The lower 58 US states are not at high latitudes, and generally have enough sunlight & wind. But of course the electricity grid will get bigger as location matters for cost.

Coal was over half UK electricity production say 20 years ago. It is now 0%. Wind was zero and is now 20-30% and on some days 100%. These changes can happen very fast.
RomeoMustDie
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Re: Can we talk about the future of oil?

Post by RomeoMustDie »

I don't like to invest in things that are off trend. Another value trap like british tobacco.
DoubleR
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Re: Can we talk about the future of oil?

Post by DoubleR »

Valuethinker wrote: Fri Aug 28, 2020 1:02 am
DoubleR wrote: Thu Aug 27, 2020 7:16 pm
Jack FFR1846 wrote: Thu Aug 27, 2020 7:11 am Perhaps oil itself will see a very slight decline, but fossil fuels will not. Where do you think EV charging energy comes from? I guess the answer depends where you live, but it's likely either coal or natural gas. There is hydro, PV and wind, which are a small part, but burning dinosaurs will still be the major source even if ICE vehicles were outlawed.

I don't know the complications, but I know that plenty of landfills are fitted with pipes and collection means to gather methane. My understanding is that it's mostly just burned off. Not sure if this could be a new form of energy or how much it would contribute to the overall usage. I suppose it could be like ethanol in gasoline. Only government requirements would make the use of methane become practical.

Oil companies? I think they all have a hand in PV, wind and other renewable technologies and companies like XOM and CVX are going to do just fine.

The 2 things that will push EVs are government regulation/money and the cost of electricity vs gas. I know that most people don't want to be bothered with the manufactured spending-like shenanigans I go through, but with the gas discounts I create, my gas car costs far less than any Tesla or Leaf per mile to run.
I look at the electric grid daily for a rather large utility and until they improve solar and battery capacity, Natural Gas, Nuclear and Hydro will continue to be where most power comes from.

Solar takes up WAY to much space for the small amount of power they produce and right now these utilities use them as a way of saying a certain percentage of the portfolio comes from "renewable energy".
North America of all places has plenty of land. Since you can still farm under solar panels and wind turbines, you haven't even "used" the land. Solar panels can also be situated on buildings. Right now wind is c 3x solar, but that will change. Both wind and solar are now the cheapest forms of new electricity generation, even cheaper than gas.
In other words they look good on paper but dont do enough for the grid and are at the mercy of the weather. Im sure out west they perform better.
on the East Coast there is offshore wind as well. The lower 58 US states are not at high latitudes, and generally have enough sunlight & wind. But of course the electricity grid will get bigger as location matters for cost.

Coal was over half UK electricity production say 20 years ago. It is now 0%. Wind was zero and is now 20-30% and on some days 100%. These changes can happen very fast.
Your right they can change very fast......North America has plenty of land in certain areas and I'm sure in the desert and wide open areas of like west Texas solar does very well.
In other areas of the U.S. not so well unless there are perfect conditions,
They are starting to put Wind Turbines off the coast and I can see that doing well.....alot better than solar anyway.

I hate to see when they destroy thousands of acres of land to put solar panels on it when they could take a tenth of that same land put a Natural Gas power plant on it that can run 24/7 at max capacity and put out WAY more power.

JMO
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Re: Can we talk about the future of oil?

Post by Valuethinker »

DoubleR wrote: Fri Aug 28, 2020 8:34 am

I hate to see when they destroy thousands of acres of land to put solar panels on it
They don't need to do that. Modern farming is essentially agro-industry, a modern farmer's field is a technologically managed biological desert (generally) -- monocultures with high inputs. Putting solar panels there is not destroying the land, and indeed the shade of the panels and the spaces in between can nurture micro-biomes.
when they could take a tenth of that same land put a Natural Gas power plant on it that can run 24/7 at max capacity and put out WAY more power.

JMO
NG is the first stage ... but NG doesn't solve the problem .. it's just on the road to solving the problem. Certainly there's now enough LNG capacity in the world to seriously talk about switching China & India over to natural gas (you'd need a several-fold expansion but the bare bones are there in Australia, Qatar, USA, Russia).

Carbon Capture & Storage might, but the "parasitic load", ie the additional energy consumed running those processes, puts them at an economic disadvantage. The existing plants have been overbudget and have had reliability issues.

The solution now exists. Solar and wind have reached the point on the cost curve where they are actually cheaper than new gas plants. There remain challenges at the system level - we don't know how much renewables we can integrate into the power mix-- as we start to get to 40%, 50% this poses new challenges. Energy storage is definitely a major frontier & opportunity. But in principle we have the ability to produce power cheaply enough .. the technologies have matured that far.

There will of course be further technical developments which will make solar more efficient per unit of area and/or cheaper. Wind it's about scale, and about going offshore - the size of new turbines is awe-inspiring (12 MW turbines! 50 of those is equivalent of an NG station, 150 generates at least much kwhr in a year as a gas-fired station).

And we will have more, and bigger, high tension lines. DC power lines are rare in USA but common in China, Brazil, Russia, Canada. All places that have their power sources a long way from their demand centres. DC is more efficient over very long distances than AC, and the visual impact of the lines is less.

New nuclear the problem is always cost. Unless you believe Russian and Chinese estimates for cost of new construction of their models of reactors, new nuclear power plants are unaffordably expensive (UK is building 2 reactors, and may build up to 4 more; same design at Flamanville in Normandy France is delayed; ditto its Finnish twin).
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Re: Can we talk about the future of oil?

Post by Valuethinker »

RomeoMustDie wrote: Fri Aug 28, 2020 1:11 am I don't like to invest in things that are off trend. Another value trap like british tobacco.
Tobacco has been a phenomenal investment for investors over the past 30 years. Just mints cash flow which it distributes to investors via buybacks and dividends.

We may be reaching endgame - the ethicist in me rather hopes so. And so the outlook is cloudy.
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Re: Can we talk about the future of oil?

Post by Jack FFR1846 »

I believe that oil will continue for the foreseeable future. Here's one of many videos talking about renewables vs the land area needed:

https://www.youtube.com/watch?v=cf66wBtzuNM

I've seen another UK version that in short found that the entire British Isle would need to be completely covered with solar panels to meet less than 100% of the current need.

I'm very pro renewable energy. But I'm very much a pragmatist.

Let's look at what is often talked about. First, electric vehicles replacing ICE vehicles. Well, ok. So that's great, but how are these vehicles charged? It's likely going to be a shift from gasoline to natural gas and coal, mainly with some Canadian hydro to supplement. Nuclear could be a solution but there's no political will to go in that direction beyond powering submarines. (Yes, a cruise ship could easily be powered by a nuclear reactor).

As mentioned, plastics are oil based. Unless you're buying a Koenigsegg (they use no plastic), you're getting a lot of oil based plastic in your new car.
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hunoraut
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Re: Can we talk about the future of oil?

Post by hunoraut »

Fundamentally, there is a finite supply, with huge infrastructure lag and cost to lift/product it, and still massive demands.

Carbon-consciousness is real.
Car electrification is real.
Green energy is real.
But industrial fuel consumption is real.
Accelerated population growth is real.
etc.

What distorts the equation is the geopolitics and the pricing power held by some of the players. Their short-term actions leads some to wrongly conclude or conclude that "oil is dead". But that old saying in finance also applies here: "market can stay irrational longer than you can stay solvent". Nations like the major players of OPEC+ cannot sustain depressed pricing for long.

$150/bbl is not natural or sustainable.
$20/bbl is not natural or sustainable.

Over the very long term, when you "smooth out"the erratic actions of rogue states and oil ministers and commodity traders, I project oil to converge at its fair and natural price of $50-60/bbl. In today's dollar. And oil will have its run for another few decades until sufficient alternatives are really ushered in.

(If you gave me a penny for my opinion, that is.)
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Re: Can we talk about the future of oil?

Post by CyclingDuo »

Helo80 wrote: Thu Aug 27, 2020 8:38 amI think this thread will be locked as it's not actionable.
I would disagree. I think the subject is actionable in terms of whether or not investment in the sector is or is not at a juncture that makes financial sense. Be it through a pair trade, a sector ETF, individual stock(s) for adding - or if one already owns some of that, deciding whether or not closing out of it at this juncture makes sense.

I would lean in the direction of combing through the sector to see what, if any, may be a current worthwhile investment that will provide returns over the next few years. More or less the "buy low, sell high or higher" camp.

"Sell Apple, Buy Exxon" might just work out to be a nice pair trade over the next 5 years. Or Sell QQQ, Buy XLE or Vanguard's VDE might also be a nice pair trade. With all the worry and talk on the forums about technology being such a large part of the index and returns - there might be some who are looking to counter that cap weighted index overweight which indeed could be actionable.

It's always nice to know where the hockey puck currently is, but where will it be a few years down the road when we consider future air travel, consumer fuel use, shipping, long haul freight, etc... ?

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Re: Can we talk about the future of oil?

Post by JBTX »

I once was a big believer in peak oil.

Not that long ago iran attacked Saudi Arabia and knocked out a material amount of their production. A while back that would have been a huge event. I made sure to get to the gas pump and fill up. I was sure their would be a big reaction.

Instead the price of gas went up about 20cents and the markets mostly shrugged it off. I agree with the post above that supply is much more flexible due to fracking. Oil will be around for a long time, but demand will flatten, supply will be plenty, and oil should stay reasonably priced within a range.

Given the accuracy of my predictions, expect $5.00 gas within 30 days.
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Re: Can we talk about the future of oil?

Post by H-Town »

Frugalbear wrote: Wed Aug 26, 2020 9:17 pm Met a friend tonight for drinks and we were discussing oil stocks, Where it was, Where it is, and where it's going.


What are your thoughts?
Oil will be in demand and current technology of renewable energy can't come close to take a big market share.

We will come to singularity, where there's a good chance oil will become obsolete. Nobody knows when we arrive at singularity.
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Re: Can we talk about the future of oil?

Post by PhooBooKhoo »

The consensus is that world oil demand will increase until about 2030. So there is still at least one more run-up for oil prices before the peak. XOM will not remain at 40.00 a share, in other words. It'll most likely get back to 80.00 or more again.
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CyclingDuo
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Re: Can we talk about the future of oil?

Post by CyclingDuo »

JBTX wrote: Fri Aug 28, 2020 10:00 am I once was a big believer in peak oil.

Not that long ago iran attacked Saudi Arabia and knocked out a material amount of their production. A while back that would have been a huge event. I made sure to get to the gas pump and fill up. I was sure their would be a big reaction.

Instead the price of gas went up about 20cents and the markets mostly shrugged it off. I agree with the post above that supply is much more flexible due to fracking. Oil will be around for a long time, but demand will flatten, supply will be plenty, and oil should stay reasonably priced within a range.

Given the accuracy of my predictions, expect $5.00 gas within 30 days.
You can just about get that price now if you fill up your tank in and around Aspen, Colorado. :beer
"Save like a pessimist, invest like an optimist." - Morgan Housel
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Re: Can we talk about the future of oil?

Post by PhooBooKhoo »

VDE is at bargain prices. It has at least one more good run left in it.
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Re: Can we talk about the future of oil?

Post by H-Town »

CyclingDuo wrote: Fri Aug 28, 2020 10:11 am
JBTX wrote: Fri Aug 28, 2020 10:00 am I once was a big believer in peak oil.

Not that long ago iran attacked Saudi Arabia and knocked out a material amount of their production. A while back that would have been a huge event. I made sure to get to the gas pump and fill up. I was sure their would be a big reaction.

Instead the price of gas went up about 20cents and the markets mostly shrugged it off. I agree with the post above that supply is much more flexible due to fracking. Oil will be around for a long time, but demand will flatten, supply will be plenty, and oil should stay reasonably priced within a range.

Given the accuracy of my predictions, expect $5.00 gas within 30 days.
You can just about get that price now if you fill up your tank in and around Aspen, Colorado. :beer
Around here it was $1.54 last time I filled up.
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CyclingDuo
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Re: Can we talk about the future of oil?

Post by CyclingDuo »

H-Town wrote: Fri Aug 28, 2020 10:18 am
CyclingDuo wrote: Fri Aug 28, 2020 10:11 am
JBTX wrote: Fri Aug 28, 2020 10:00 am I once was a big believer in peak oil.

Not that long ago iran attacked Saudi Arabia and knocked out a material amount of their production. A while back that would have been a huge event. I made sure to get to the gas pump and fill up. I was sure their would be a big reaction.

Instead the price of gas went up about 20cents and the markets mostly shrugged it off. I agree with the post above that supply is much more flexible due to fracking. Oil will be around for a long time, but demand will flatten, supply will be plenty, and oil should stay reasonably priced within a range.

Given the accuracy of my predictions, expect $5.00 gas within 30 days.
You can just about get that price now if you fill up your tank in and around Aspen, Colorado. :beer
Around here it was $1.54 last time I filled up.
It's around $3.60 in Aspen. Was higher than that last month.
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texasfight
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Re: Can we talk about the future of oil?

Post by texasfight »

Buy TPL. Or MNRL and BSM if you are ok with exposure outside of Permian, and some natural gas exposure.

E&P's are valued off of FCF multiples, yet their production is declining with fixed costs and they are running out of locations.

Minerals made everyone who owned them rich in the US. And they are still holding onto their gains, E&P's essentially defrauded investors out of billions. Those stock prices are not coming back.

The IR presentations and the EUR's of the wells are just plain faked.

I am a petroleum engineer and 3rd generation Permian mineral investor.

If I had to invest in a single stock for 20 years it would probably be TPL.
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Re: Can we talk about the future of oil?

Post by arcticpineapplecorp. »

Frugalbear wrote: Wed Aug 26, 2020 9:17 pm Met a friend tonight for drinks and we were discussing oil stocks, Where it was, Where it is, and where it's going.


What are your thoughts?
what were your thought after last night's conversation?

what are your thoughts after reading all these comments?

do you tend to invest in sectors rather than the whole market? If so, why? Do you like taking sector risk which you can avoid by owning the whole market? If so, why?

Do you like taking stock risk (individual oil stocks) which you can avoid by owning the whole market? If so, why?

Do you think you know anything anyone else doesn't already know (i.e., can you outsmart the market?)?
Last edited by arcticpineapplecorp. on Fri Aug 28, 2020 11:07 am, edited 2 times in total.
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Re: Can we talk about the future of oil?

Post by JBTX »

texasfight wrote: Fri Aug 28, 2020 10:25 am Buy TPL. Or MNRL and BSM if you are ok with exposure outside of Permian, and some natural gas exposure.

E&P's are valued off of FCF multiples, yet their production is declining with fixed costs and they are running out of locations.

Minerals made everyone who owned them rich in the US. And they are still holding onto their gains, E&P's essentially defrauded investors out of billions. Those stock prices are not coming back.

The IR presentations and the EUR's of the wells are just plain faked.

I am a petroleum engineer and 3rd generation Permian mineral investor.

If I had to invest in a single stock for 20 years it would probably be TPL.
https://finance.yahoo.com/quote/tpl

The markets don't seem to agree with you today. Perhaps an interesting contrarian play.
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Re: Can we talk about the future of oil?

Post by 92irish »

I have started a much bigger position in Vanguard Energy Fund (VGENX) back in April. So, I guess that puts me in the I don't think energy is going anywhere including oil even more so natural gas. VGENX is an excellent fund (and is superior to the energy index fund VDE), as VGENX is more diversified and contains the global players (like Total, BP, Shell, Enbridge), utilities, and more midstream pipelines. VDE only has the domestic equities which is a negative. True overall, historically VGENX has still not done well relative to say the S&P, but has consistently beaten the index ETF VDE and still has low costs. I am looking forward with my investment not backwards, and VGENX seems to be a deep value long term hold. VGENX is the better play if you want to dip your toe into energy IMHO.

My thesis is that energy demand is not going anywhere and ultimately will increase as population increases. There seems to be no movement to expand nuclear which would be the game changer for electricity, so while crude oil use may slow for cars I see natural gas as a low carbon alternative being replacement to generate all the increasing electricity demand (and especially a replacement for coal).
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Re: Can we talk about the future of oil?

Post by texasfight »

global crude demand will peak around 2030-2035 IMO. Eventually crude will get priced out of use by electric cars running off natural gas and solar. We are running out of cheap oil, US has one more drilling boom left when the massive production declines and loss of capital investment set us up for a major shortage in 2-4 years.
ncbill
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Re: Can we talk about the future of oil?

Post by ncbill »

Oil is used mostly for transport...and electrification of that sector in every segment (personal vehicles to commercial transport) is only accelerating.

So I sold my oil stocks last year, though I do still have a couple of direct oil & gas investments (actual wells) that will run their course over the next several years.
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Re: Can we talk about the future of oil?

Post by surfstar »

Oil will go the way of the dinosaurs. Not sure when, though. Humans will likely have the same fate as well.

So drink up while you can! :sharebeer
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ray.james
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Re: Can we talk about the future of oil?

Post by ray.james »

Oil in some form will exist for a long time. But some folks are missing what electrification is doing.

The efficiency of gas powered power station is at 55-60%.
Coal/oil is at 37%.
The efficiency of the gas car is at 17%.

There are transmission losses of 2-5%, 10% with in electric car operation. But gallon to gallon - running a gas car vs EV car powered by gas power station is twice as efficient. If we consider a natural gas powered station, EV is 2.5 - 3 times efficient. The efficiency of natural gas station is still increasing from research at the rate of 0.25-0.5% every year. When we consider solar, this equation is now crazy.

If Tesla can bring a semi at 200k or even at 350K, it is still a game changer.

The entire industry is much more elastic and its profitability is continuing to decrease. At some point in coming years, energy sector is equivalent to low profitable utilities.
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