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"The minute Tesla and others get electric vehicles to have sufficient range and low enough costs, we're going to see demand for oil go into structural decline.

"The minute Tesla and others get electric vehicles to have sufficient range and low enough costs, we're going to see demand for oil go into structural decline. " No, sorry. People have been predicted 'peak oil' and 'peak demand' since the 1970's. Even a large number of Tesla's wont change that. You do realize that there are a few billion 'carless' people in the world who are soon going to become 'cared'? And they live in places that won't care about CO2, either from a policy or populist perspective? And that there are a million other uses for oil other than family transportation? The most salient issues in Aramco's valuation are: 1) Regime volatility: taxes etc. - not only will they change, they could change a lot. 2) Production and price volatility: a lot of geopolitical things go into how much they product, and there are massive shifts in prices over time. Booms and busts - not like most products (think Windows OS, or cars - they don't change that much in price) 3) Horizon: we're having to predict so far out into the future, there's considerable volatility just in that. 4) Cost of Capital leverage volatility: in a world of low interest rates, small changes in cost of capital tend to be amplified. Going from 5% to 10% is similar to 1% to 2%. Since we're in an era of very low interest rates, everything gets magnified and ballooned up. I actually don't believe that alternative forms of energy production or transportation will make a dent in any of it. There's so many ways to use Oil, that any drop in price introduces those mechanisms and it ends up becoming valuable again.

sytelus 10y ago
Electric cars isn't just for environment. It's really nice to have car which doesn't have all these complicated mechanics that wears out all the time and requires so much maintenance. About 2/3rd of the cars I have owned died before they crossed 60,000 miles. There are only few brands and models in market that can pull off 200K miles which means gas powered vehicles constantly keeps you on debt. Have you seen the acceleration in electric cars? Noise levels? It uses magnetic flux for breaking, so no break pads and its far more effective. You get tons of space for storage freed up from space taken up by huge multi-cylinder engines. Add on to the fact that several places offer free changing which is equivalent to getting free gas all the time. If every gas pump offered charging or battery swap then there are exactly zero reasons to own gas powered cars even if you didn't gave a damn about environment.
cstejerean 10y ago
Peak oil and peak oil demand are two different things though, and I peak oil demand is relatively recent. The original peak oil theory was that at some point the peak production would be reached, after which production had nowhere to go but down. Since demand would continue to increase this would lead to ridiculously high oil prices and all types of terrible consequences. Peak production however never materialized because we kept finding new reserves and new technology to extract more out of fields (like hydaraulic fracturing). Then the world realized that oil demand will peak before oil production does. It's still hard to predict exactly when this will happen, but it's very different from peak production. Peak oil relied on us not finding new reserves and technology not improving. Peak oil demand on the other hand is based on technology continuing to improve so that the cost of generating and storing electricity will shift a lot of demand away from oil. I think this second prediction is a lot more likely than the first, and it's the reason I never worried about peak oil in the first place. People are really good at coming up with new technologies and lowering the cost of alternative energy sources. So I never bought into the doom and gloom stories of what would happen when we run out of oil.

sytelus 10y ago

Electric cars isn't just for environment. It's really nice to have car which doesn't have all these complicated mechanics that wears out all the time and requires so much maintenance. About 2/3rd of the cars I have owned died before they crossed 60,000 miles. There are only few brands and models in market that can pull off 200K miles which means gas powered vehicles constantly keeps you on debt. Have you seen the acceleration in electric cars? Noise levels? It uses magnetic flux for breaking, so no break pads and its far more effective. You get tons of space for storage freed up from space taken up by huge multi-cylinder engines. Add on to the fact that several places offer free changing which is equivalent to getting free gas all the time. If every gas pump offered charging or battery swap then there are exactly zero reasons to own gas powered cars even if you didn't gave a damn about environment.

cstejerean 10y ago

Peak oil and peak oil demand are two different things though, and I peak oil demand is relatively recent. The original peak oil theory was that at some point the peak production would be reached, after which production had nowhere to go but down. Since demand would continue to increase this would lead to ridiculously high oil prices and all types of terrible consequences. Peak production however never materialized because we kept finding new reserves and new technology to extract more out of fields (like hydaraulic fracturing). Then the world realized that oil demand will peak before oil production does. It's still hard to predict exactly when this will happen, but it's very different from peak production. Peak oil relied on us not finding new reserves and technology not improving. Peak oil demand on the other hand is based on technology continuing to improve so that the cost of generating and storing electricity will shift a lot of demand away from oil. I think this second prediction is a lot more likely than the first, and it's the reason I never worried about peak oil in the first place. People are really good at coming up with new technologies and lowering the cost of alternative energy sources. So I never bought into the doom and gloom stories of what would happen when we run out of oil.