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I might be a bit crazy, but you just mentioned a slate of companies that absolutely have no future at their current scale. Sure this won't happen overnight...

I might be a bit crazy, but you just mentioned a slate of companies that absolutely have no future at their current scale. Sure this won't happen overnight... But my theory with petroleum is that it has so many HUGE economies of scale built into its production that a demand collapse will send it into a rapid tailspin. A small version of this happened in the Dakotas when the Saudis started dumping oil to get it under a price, and the North Dakota oil industry collapsed. That was due to intentional oversupply, not necessarily due to collapsed demand. But so much of the oil market is now pretty expensive extraction: tar sands, shale oil, fracking, deep offshore. The easy stuff is gone. That to me means that the industry rests on a certain price, and if it falls under that, the industry can't sustain it. I think the big thing in this reverse economies of scale, where costs rise as the industry shrinks (and absorbs writeoffs) is that finance, already somewhat intimidated by the growing pressure to divest from fossil fuels, will rapidly abandon it once it becomes extremely risky due to collapsing demand and massive migrations of transportation modes to electric. It's all vague decade-away prognostication, but you'll start hearing the violins playing for oil companies when some combination of this happens: - charging infrastructure builds out (2 years to catch the current Tesla supercharger, probably another 5 years to get some semblance of every-50-miles availability) - LFP chemistry hits a power density of somewhere around 200-250wh/kg (LFP is really cheap and has far less materials restrictions from cobalt) (probably in 1-2 years for mass production) - various solid state technologies hit production (looks unlikely for 5 years) - EV drivetrain cost (battery, motors, cooling, case, management systems, etc) drops to 2/3 of ICE (probably another 4 years) - a carbon tax, a more substantial EV subsidy The floor will rapidly fall. I'm not saying Tesla isn't insanely valued. But the grim reaper is coming for all those oil companies.

tappio 5y ago
We are so dependent on fossil fuels that I'm slightly more sceptical. Over 90% of global energy is created with fossil fuels. We often get fooled about the electricity sector which is something like 1/3 renewables. But electricity is only 30% of fossil fuel consumption. Even if the share of electricity increases to 40% because of ev's and we produce 80% with renewables, we still have ~70% that requires fossil fuel production. That 70% is not that easy to replace -- we are talking about manufacturing, logistics, agriculture, mining, etc. Getting rid of coal only increases oil and gas demand. I'm not sure what is the percentage of consumer sales for any if those companies mentioned, but I suspect that even if it was 0 it would not drastically affect anything but profits. Oil will be less profitable -- yes, but it will be widely used as long as energy required to mine it is less than what is produced. It is unfortunate, but these companies are on a very good long term business (hard to say really because I don't know what are the global untapped oil reserves). Manufacturing components to produce renewables require a lot of fossil fuels as well. We are not yet at the point where we can create new renewables without using fossil fuels. I'm not saying the floor will not fall, but I'm afraid that if the floor falls we are in quite big trouble, and it is not because if the EV market.
- fragmede 5y ago
  Zooming out to a global level, geopolitics becomes important to consider as well. As soon as renewables are able to change the power dynamics between eg Russia and Ukraine (Ukraine is dependant on Russia for oil for heating in the winter) things get very interesting indeed. We are still decades away from that imo.
  - throwaway210222 5y ago
    Surely Ukraine just needs to allow EDF to build few nuclear power stations on long term agreements to end their dependence on Russian heating oil?
    - vineyardmike 5y ago
      Its surely just that easy... for a small and relatively powerless nation to product nuclear power under the watchful eye of a very powerful nation that doesn't want it.
      - throwaway210222 5y ago
        Ukraine already has 15 reactors generating about half of its electricity. (Including one famous one). Ukraine receives most of its nuclear services and nuclear fuel from Russia, but is reducing this dependence by buying fuel from Westinghouse in the USA. Just do more of this. I doubt Russia will attack a US concession that's building a nuclear plant.
  - AtlasBarfed 5y ago
    Oh yes! We won't care about the middle east, so none of that bizarre cowtowing to the Saudi king that the US Presidents always do (I think largely to get on the post-term massive slush money that flows from the Saudis to former presidents, which I have no direct knowledge up, but seems obvious) The Navy will lose a huge reason for its existence: securing the seas for supertankers. There are so many countries we won't care about anymore. Iran. Iraq. Venezuela. Nigeria. Really, by extension, Israel, Egypt, Jordan, etc. Then again they'll just keep building up the China boogeyman to keep their money, regardless of its validity. As you pointed out, Russia will face an existential crisis, I think oil revenue basically keeps Putin afloat. A total collapse of Russia is pretty risky due to the nukes, but we'll see.
fragmede 5y ago
- People realize what a game changer it is to charge your car overnight and start every day with a full tank of "gas". It's a tiny detail, but a car that can only go 100 miles before needing to refill the gas tank is annoying. A car that starts every day with a 100 miles of range is terribly (for the oil companies) convenient.
- TeMPOraL 5y ago
  That one is complicated a bit by housing situation - but if, if, cities and freeholders get serious about ensuring every possible parking spot (including unmarked ones) has a convenient electrical outlet nearby, that would be a game changer. In a sense, this would be much cheaper and more convenient than supercharger stations - but what it trades in infrastructure saving, it costs in getting myriad of land owners and councils to make it happen.
  - fragmede 5y ago
    You're totally right but again thinking globally, different cultures handle housing in a manner that supports that. I'm thinking of Japan, where they rebuild houses every few years because they're old. Which results in most houses having electric car plugs in them. I have no such hope for my SF condo that I'm writing you from. Maybe I can run an extension cord out of my window to my car parked on the street?
    - fomine3 5y ago
      > I'm thinking of Japan, where they rebuild houses every few years because they're old. This is myth. 35yr loan is pretty basic, most loan supports up to 50yr. We can see many houses built 35yr ago. Anyway, installing EV charger is easy task for own house. It just takes about from $200 if 200V line is available. I believe mostly available unless the house is very old. More importantly, there are many condos and parking that's hard to install charger due to it need to be approved in condo committee.
  - AtlasBarfed 5y ago
    I don't worry about a lot of the NIMBY with self-charging. It'll be like bike lanes, once people discover they increase property values, or at least keep them from sinking, it will be a done deal.
breakyerself 5y ago
Anyone intentionally investing in fossil fuels today is delusional. These companies should have died years ago, but they've managed to delay the inevitable by lobbying to delay action and protect their massive subsidies. Tesla has shown electric cars can be superior to gas cars in all but one metric (road trips) and they're closing in on that. Wind and solar are now cheaper than coal and in some markets cheaper than natural gas. At peak times electricity from renewables is so cheap its creating a gold rush to develop low cost energy storage to soak up all the dirt cheap electricity that's being produced. Theres also companies who can produce synthetic liquid fuels with co2 from direct air capture using renewable energy. With a decent carbon tax they could compete directly with fossil fuel companies but eventually renewable energy should be cheap enough that they won't even need a carbon tax. Fossil fuel companies are as good as dead. They just dont know it yet.
dado3212 5y ago
I think that’s definitely true for some of these, and I wouldn’t be as surprised by TSLA having a higher market cap then all of these companies. It’s the combined bit that’s weird. I think ExxonMobil would position itself more as an “energy company” than an “oil company” for instance, and I doubt it will just roll over and die.
- AtlasBarfed 5y ago
  I'd agree, but what's the oil company play for relevance? I believe algal biofuels are a failure. Even plastics are under assault, so they can't retreat to materials. Nukes are too far from their backyard. All their carbon capture is pump-into-the-ground and pray/lie to the regulators. Honestly though, I think this is what they have going for themselves: - a large amount of smart, if unprincipled, engineers. - a huge apparatus for government lobbying - maybe a lot of capital, or at least some window to invest in switchover? - generator knowhow (turbines, etc) - global logistics systems The government lobbying is the key. If there is one industry that could get LFTR/NextGenNuclear off the ground it would be the oil/gas people. The legacy nuclear industry has no ability or desire to produce a nuclear power gen solution that is competitive not only with current day alt energy, but the alt energy that will be in ten years. I'm the guy that tells every pro-nuclear post on HN that its infeasible to chase whatever gee-whiz design is being discussed because of the ten year lead time and that storage/wind/solar are still on nonlinear cost improvement curves. But the oil/gas industry DOES have the political juice to chase that at the multiple levels of federal/state/local/military/civilian that it would require to get a cost-effective small-scale nuclear reactor solution like a LFTR/MSR. But that really is a pipe dream. That would require foresight from the executives, and executives in fading industries almost always just ride the companies into irrelevance, and most importantly for the executives, retirement/pension, and of course huge out-the-door "retention bonuses" in the dying days.
  - dado3212 5y ago
    Turbines, nuclear, fusion, renewables is the play for relevance. That and squeeze every last drop out of the last century of fossil fuels. Many won't survive, but some of them will pivot in time/have enough burn to pivot later than they should have.
nebula8804 5y ago
>But my theory with petroleum is that it has so many HUGE economies of scale built into its production that a demand collapse will send it into a rapid tailspin. THIS! Thank you for bringing this up. Few people talk about this coming death spiral. This is really going to mess up a lot of countries incomes and may have severe worldwide political ramifications. In your opinion when do you think it will trigger? It feels like when it does actually happen, its going to happen quickly. From my vantage point in the US it still seems like the majority are not realizing what is coming. Hell Companies like Ford are still introducing new vehicle platforms in ICE configuration only (Ford Bronco for example) and people are buying them up without any consideration as to the future so I suspect it won't happen this decade. I don't know enough about the economics of the fossil fuels supply chain to make a reasonable calculation. In terms of your other calculations your targets seems very reasonable. Its amazing at how Tesla is iterating so fast on things like Battery and Motor design. Its super sexy to see the new stuff they keep pumping out(even if the founder seems like a jerk)

tappio 5y ago

We are so dependent on fossil fuels that I'm slightly more sceptical. Over 90% of global energy is created with fossil fuels. We often get fooled about the electricity sector which is something like 1/3 renewables. But electricity is only 30% of fossil fuel consumption. Even if the share of electricity increases to 40% because of ev's and we produce 80% with renewables, we still have ~70% that requires fossil fuel production. That 70% is not that easy to replace -- we are talking about manufacturing, logistics, agriculture, mining, etc. Getting rid of coal only increases oil and gas demand. I'm not sure what is the percentage of consumer sales for any if those companies mentioned, but I suspect that even if it was 0 it would not drastically affect anything but profits. Oil will be less profitable -- yes, but it will be widely used as long as energy required to mine it is less than what is produced. It is unfortunate, but these companies are on a very good long term business (hard to say really because I don't know what are the global untapped oil reserves). Manufacturing components to produce renewables require a lot of fossil fuels as well. We are not yet at the point where we can create new renewables without using fossil fuels. I'm not saying the floor will not fall, but I'm afraid that if the floor falls we are in quite big trouble, and it is not because if the EV market.

fragmede 5y ago
Zooming out to a global level, geopolitics becomes important to consider as well. As soon as renewables are able to change the power dynamics between eg Russia and Ukraine (Ukraine is dependant on Russia for oil for heating in the winter) things get very interesting indeed. We are still decades away from that imo.
- throwaway210222 5y ago
  Surely Ukraine just needs to allow EDF to build few nuclear power stations on long term agreements to end their dependence on Russian heating oil?
  - vineyardmike 5y ago
    Its surely just that easy... for a small and relatively powerless nation to product nuclear power under the watchful eye of a very powerful nation that doesn't want it.
    - throwaway210222 5y ago
      Ukraine already has 15 reactors generating about half of its electricity. (Including one famous one). Ukraine receives most of its nuclear services and nuclear fuel from Russia, but is reducing this dependence by buying fuel from Westinghouse in the USA. Just do more of this. I doubt Russia will attack a US concession that's building a nuclear plant.
- AtlasBarfed 5y ago
  Oh yes! We won't care about the middle east, so none of that bizarre cowtowing to the Saudi king that the US Presidents always do (I think largely to get on the post-term massive slush money that flows from the Saudis to former presidents, which I have no direct knowledge up, but seems obvious) The Navy will lose a huge reason for its existence: securing the seas for supertankers. There are so many countries we won't care about anymore. Iran. Iraq. Venezuela. Nigeria. Really, by extension, Israel, Egypt, Jordan, etc. Then again they'll just keep building up the China boogeyman to keep their money, regardless of its validity. As you pointed out, Russia will face an existential crisis, I think oil revenue basically keeps Putin afloat. A total collapse of Russia is pretty risky due to the nukes, but we'll see.

fragmede 5y ago

- People realize what a game changer it is to charge your car overnight and start every day with a full tank of "gas". It's a tiny detail, but a car that can only go 100 miles before needing to refill the gas tank is annoying. A car that starts every day with a 100 miles of range is terribly (for the oil companies) convenient.

TeMPOraL 5y ago
That one is complicated a bit by housing situation - but if, if, cities and freeholders get serious about ensuring every possible parking spot (including unmarked ones) has a convenient electrical outlet nearby, that would be a game changer. In a sense, this would be much cheaper and more convenient than supercharger stations - but what it trades in infrastructure saving, it costs in getting myriad of land owners and councils to make it happen.
- fragmede 5y ago
  You're totally right but again thinking globally, different cultures handle housing in a manner that supports that. I'm thinking of Japan, where they rebuild houses every few years because they're old. Which results in most houses having electric car plugs in them. I have no such hope for my SF condo that I'm writing you from. Maybe I can run an extension cord out of my window to my car parked on the street?
  - fomine3 5y ago
    > I'm thinking of Japan, where they rebuild houses every few years because they're old. This is myth. 35yr loan is pretty basic, most loan supports up to 50yr. We can see many houses built 35yr ago. Anyway, installing EV charger is easy task for own house. It just takes about from $200 if 200V line is available. I believe mostly available unless the house is very old. More importantly, there are many condos and parking that's hard to install charger due to it need to be approved in condo committee.
- AtlasBarfed 5y ago
  I don't worry about a lot of the NIMBY with self-charging. It'll be like bike lanes, once people discover they increase property values, or at least keep them from sinking, it will be a done deal.

breakyerself 5y ago

Anyone intentionally investing in fossil fuels today is delusional. These companies should have died years ago, but they've managed to delay the inevitable by lobbying to delay action and protect their massive subsidies. Tesla has shown electric cars can be superior to gas cars in all but one metric (road trips) and they're closing in on that. Wind and solar are now cheaper than coal and in some markets cheaper than natural gas. At peak times electricity from renewables is so cheap its creating a gold rush to develop low cost energy storage to soak up all the dirt cheap electricity that's being produced. Theres also companies who can produce synthetic liquid fuels with co2 from direct air capture using renewable energy. With a decent carbon tax they could compete directly with fossil fuel companies but eventually renewable energy should be cheap enough that they won't even need a carbon tax. Fossil fuel companies are as good as dead. They just dont know it yet.

dado3212 5y ago

I think that’s definitely true for some of these, and I wouldn’t be as surprised by TSLA having a higher market cap then all of these companies. It’s the combined bit that’s weird. I think ExxonMobil would position itself more as an “energy company” than an “oil company” for instance, and I doubt it will just roll over and die.

AtlasBarfed 5y ago
I'd agree, but what's the oil company play for relevance? I believe algal biofuels are a failure. Even plastics are under assault, so they can't retreat to materials. Nukes are too far from their backyard. All their carbon capture is pump-into-the-ground and pray/lie to the regulators. Honestly though, I think this is what they have going for themselves: - a large amount of smart, if unprincipled, engineers. - a huge apparatus for government lobbying - maybe a lot of capital, or at least some window to invest in switchover? - generator knowhow (turbines, etc) - global logistics systems The government lobbying is the key. If there is one industry that could get LFTR/NextGenNuclear off the ground it would be the oil/gas people. The legacy nuclear industry has no ability or desire to produce a nuclear power gen solution that is competitive not only with current day alt energy, but the alt energy that will be in ten years. I'm the guy that tells every pro-nuclear post on HN that its infeasible to chase whatever gee-whiz design is being discussed because of the ten year lead time and that storage/wind/solar are still on nonlinear cost improvement curves. But the oil/gas industry DOES have the political juice to chase that at the multiple levels of federal/state/local/military/civilian that it would require to get a cost-effective small-scale nuclear reactor solution like a LFTR/MSR. But that really is a pipe dream. That would require foresight from the executives, and executives in fading industries almost always just ride the companies into irrelevance, and most importantly for the executives, retirement/pension, and of course huge out-the-door "retention bonuses" in the dying days.
- dado3212 5y ago
  Turbines, nuclear, fusion, renewables is the play for relevance. That and squeeze every last drop out of the last century of fossil fuels. Many won't survive, but some of them will pivot in time/have enough burn to pivot later than they should have.

nebula8804 5y ago

>But my theory with petroleum is that it has so many HUGE economies of scale built into its production that a demand collapse will send it into a rapid tailspin. THIS! Thank you for bringing this up. Few people talk about this coming death spiral. This is really going to mess up a lot of countries incomes and may have severe worldwide political ramifications. In your opinion when do you think it will trigger? It feels like when it does actually happen, its going to happen quickly. From my vantage point in the US it still seems like the majority are not realizing what is coming. Hell Companies like Ford are still introducing new vehicle platforms in ICE configuration only (Ford Bronco for example) and people are buying them up without any consideration as to the future so I suspect it won't happen this decade. I don't know enough about the economics of the fossil fuels supply chain to make a reasonable calculation. In terms of your other calculations your targets seems very reasonable. Its amazing at how Tesla is iterating so fast on things like Battery and Motor design. Its super sexy to see the new stuff they keep pumping out(even if the founder seems like a jerk)