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  • docjoe999 docjoe999 Aug 20, 2008 12:43 PM Flag

    The problem with oil nuts is that people believed them

    The scheme dreamed up by Matthew Simmons was to press on about how the world is running out of oil and what a calamity it will be. Simmons suggestions to head off this upcoming "crisis" were so stupid it made my head hurt. "Buy food only locally grown", he said.

    The good thing though is that people started to believe him and it spurred innovation, and no one more so than Martin Eberhard who co-founded Tesla Motors.

    I have been looking at ethanol for vehicles for quite some time, but this article changed my thinking about it, http://money.cnn.com/2008/07/07/technology/copeland_tesla.fortune/index.htm.

    In particular, there was this passage, "Eberhard spent almost a year doing an analysis of what energy source was most efficient for his imagined eco-supercar. He examined and dismissed hydrogen fuel cells, natural-gas-powered cars, hybrid technologies, and diesel. The energy source that offered the highest efficiency and performance, he concluded, was pure electric."

    What is so beautiful about this is now any form of energy (wind, nuclear, coal, solar) could compete with oil.

    However, while Tesla is a niche play, it spurred on the big car producers. <Tesla has begun delivering cars just as gas prices and fears about global warming have shot to all-time highs. All those automakers that shelved plans have since restarted them. Nissan (NSANY), Mitsubishi, Daimler, Subaru, and boutique firms like Fisker Automotive are furiously working on new models - some all-electric, others range-extended EVs - but won't get to market till 2009-13. GM's Bob Lutz even credited his company's relaunch to Tesla. "If some Silicon Valley startup can solve this equation," he told Newsweek, "no one is going to tell me anymore that it's unfeasible.">

    GM is the closest and plans on cranking out Chevy Volts in fall of 2010, and they already have an unofficial waiting list of 100,000 people.

    At current electric prices, the Chevy Volt will take you 40 miles for the equivalent of 80 cents per gallon, and the hope is the electric range will get even longer as battery technology improves.

    Of course, the oil nuts will have their say on why this technology won't be implemented (who wants to plug in a car all day?, the batteries are potentially toxic, it is a niche product).

    What is ironic is that Tupi is not really supposed to take off until 2020, twelve years from now, and my guess is that one in one hundred people here was even on the internet in 1996, twelve years ago.

    My stockbroker was pushing AOL on me back in 2000, and I asked why? There was nothing on AOL that I couldn't get from my high speed internet connection (which at the time was a satellite). Just like AOL had to compete with broadband, oil will have to soon compete with electricity, and that means at 80 cents a gallon, which ironically is what ethanol can be produced for in Brazil today.

    That begs the question, Can Tupi and Carioca compete/be profitable with fuel at that cost? IMO, the answer is no.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • <No, I was speaking to professionally managed money...often managed on behalf of retail investors....this is money that moves in response to interest rate differentials. You deny this?

      Unbelievable that you would dispute a basic concept in finance that any first year business student would know about.>

      If there are higher interest rates in Zimbabwe, it is a well known fact that all money will flow from the U.S. to Zimbabwe as investors care nothing about laws in Zimbabwe nor how solid the currency is. They only trade on the basis of interest rates set by various government. I am wrong, and you are right. We are lucky to have any money in the U.S. right now as every sane U.S. person should move all their money to Brazil or Zimbabwe or wherever they can get a higher yield. Nothing else matters but higher yields. You are right, and I am wrong.

      Winny, you dummy, there is no free flow of currency between the U.S. and Brazil like there is between the U.S. and Europe or Japan. That is why PBR cannot hedge its currency bets, and guess what? They would love to do so. It is a risk they don't want to take.

    • Almost every commodity went higher as money flowed into them, and the result has been a worldwide slowdown>>

      The meltdown in the financial system is a bigger factor IMO.

    • <how much would you charge today for your oil?> Fred, you and Winny have this so wrong. Suppliers do not set the price of oil; the futures market does.

      "Most crude oil is traded based on long-term contracts, and the prices in those contracts are set by a system known as "formula pricing". In this system, the price of delivered crude is set by adding a premium to, or subtracting a discount from, certain benchmark or marker crudes, namely: West Texas Intermediate (WTI), Brent and Dubai-Oman. Generally, WTI is used as the benchmark for oil sold to North America, Brent for oil sold to Europe and Africa, and Dubai-Oman for Gulf crude sold in the Asia-Pacific market (Source1, Source2)."

      So the price of oil is set by the market. The question is if the market was being illegally or improperly manipulated. I think the answer is yes on both counts, but the latter is not in dispute, and it was not just oil. Almost every commodity went higher as money flowed into them, and the result has been a worldwide slowdown.

      <There are not enough lawyers to sue every company that makes profits.> I wish.

      <Or, we can just have someone like you make the final call as to when a company is making too much money.> Or we could leave that up to juries. Nah, I think I should make all the decisions on this matter.

      <How do you get anyone to invest in any company when there is a threat the government can capriciously levy new taxes just because the company made money or a lot of money?> In the U.S., we are the government, Fred. Oil company CEOs were asked to appear before Congress, they pleaded their case, and Congress left them alone.

      The laws of supply and demand can be manipulated to corporate America's benefit, and what you are suggesting was tried by John D. Rockefeller in the early 1900s Fred. Maybe you and I can agree to disagree on this, but I do not think anti-trust law has hurt our economy.

    • What a crock.


      The one grain of truth in your comments is that electric vehicles are the most promising development in MITIGATING the peak oil crisis.


      However, get real about it. How many Americans can afford a Tesla?

      The Chevy Volt is going to retail for $35,000-$40,000. So that is not the revolutionary development that is going to get us off oil. The vast majority of people can't afford paying that much for a car.

      So when are we going to have an electric car that ordinary people can afford? I would say most optimistically, around 2015. More realisticially, 2020.

      And then it will take a 10-15 year transition period for people to scrap out their internal combustion vehicles and replace them with electrics.

      So electric vehicles may start to make a big dent in global oil consumption by 2025-2030. That is great, it means oil may be $200 per barrel then instead of $500 per barrel.

      Another thing that could mitigate oil prices is natural gas vehicles. One of the few bright spots on the fossil fuel front is the large amounts of possible reserves of unconventional natural gas that have been getting discovered in the various "shales" around the US.

      Even after much of the world runs on electric vehicles, which as I indicated best case scenario would be around 2025-2030, there are still substantial applications where you need oil. Jet fuel for example. And if you look at the fossil fuel situation as a whole, there will be a big ongoing need for natural gas for agricultural chemicals.

      And then, once we rely on electricity for a bigger portion of our energy supply, what do we generate the electricity from?

      Wind and solar do not generate electricity when and where you want it, they generate it when and where they decide. Namely, when and where it is windy and sunny.

      That won't be a big problem by 2030 in my view, but only because of, guess what? Fossil fuels? I believe we will still have enough natural gas at that time to run peaking plants to supply electricity during the lull periods when the wind and solar plants are idle.

      As we move further toward 100% renewables for our electricity supply in the latter half of the century, the "load-matching" problem will become a much bigger issue. So far I don't believe there are any solutions that we will be able to count on for mass storage of renewable energy so it can be retrieved when needed.

      I believe coming up with that will be the biggest technological challenge ever faced by mankind. We may succeed, we may not. I won't be around to see how it comes out.

      But back to the original topic, your notion that electric vehicles will prevent the skyrocketing of oil prices is in my view naive up the yin yang.

      • 2 Replies to bot_feeder
      • <The Chevy Volt is going to retail for $35,000-$40,000. So that is not the revolutionary development that is going to get us off oil. The vast majority of people can't afford paying that much for a car.>

        My first PC was $3000, and my first laptop was $5000.

        < I would say most optimistically, around 2015. More realisticially, 2020.>

        And when are PBR's big fields suppose to get going?

        <So electric vehicles may start to make a big dent in global oil consumption by 2025-2030. That is great, it means oil may be $200 per barrel then instead of $500 per barrel.>

        Right, people are going to pay for $10 gasoline over $1 ethanol and the equivalent of a buck in energy.

        <there are still substantial applications where you need oil.> Typical oil nut using a straw man/false dilemma fallacy. When did I post oil was not going to be used? Where did I post that electric cars were going to make gasoline cars extinct?

        <Wind and solar do not generate electricity when and where you want it, they generate it when and where they decide. Namely, when and where it is windy and sunny.>

        Obviously, you didn't read the MIT breakthrough link I posted, so I am done with you. You have already made up your own mind and will reject any new data that contradicts your pigheaded conclusion.

      • <Even after much of the world runs on electric vehicles, which as I indicated best case scenario would be around 2025-2030, there are still substantial applications where you need oil. Jet fuel for example. And if you look at the fossil fuel situation as a whole, there will be a big ongoing need for natural gas for agricultural chemicals. >

        or maybe we will see "electric jets"...lol

    • The problem with the electric car is the slow pace of change in the auto industry. The prius has been out for many years now. I remember when someone at my company bought one of the first ones about seven years ago. It seemed futuristic then. I rented one recently. It still seemed futuristic. I still think it looks as ugly as hell but I can't fault its engine design. The other auto makers that are finly producing their first hybrids cannot come close to the gas milage that Toyota managed years ago. In fact they have been going backwards. A Geo Metro got 50 MPG ten years ago.

      I would guess it will take the auto industry 15 to 20 years to switch over to all electric cars. By then world oil production will have long since peaked. I am not sure there will even be enough oil to produce the tires the electric cars will need let alone all the other synthetic materials and energy to produce a complete automobile and ship it to a dealer. Of course the world economy will have crashed so you won't have money to afford the car anyway. Oh and the roads won't have been repaved for a decade so good luck driving anywhere.

      Tell me again how electricity is the answer?

      • 1 Reply to grangerfx
      • "In fact they have been going backwards. A Geo Metro got 50 MPG ten years ago."

        My 1990 Metro has almost 300K miles, has only partial compression in one of it's three cylinders, and I can still acheive 54 mpg* on my mixed city/highway 199 mile round trip. And mine was NOT the high-economy version called the XFi. That version had two-ring pistons, a reduced interval camshaft, and a taller final drive ratio. People who own those report 60 mpg+.

        *I drive slightly under the speed limits when it is safe to do so, but otherwise take no extreme measures. In pure highway driving my metro gets as much as 58 mpg.

    • you are like the madman in the horror film of old who tries to befriend the monster and ultimately suffers the most horrible death by him.
      You were the last to grasp and accept the old technologies and once you did you were the last to let go of. oil is going much higher. Embrace what oil you have . realize it's value and accept new alternative methods of energy. Just because traditional ethanol is not perfect, you cannot scoff at the totality of the problem.

    • Hey Doc,
      Well, this is good news for me as I own quite a few shares of SQM. SQM is the worlds largest Lthium producer in the world . IT has 75& if all the lithium. Guess I will have to wait til 2099-.2010.

      • 1 Reply to lilliebelle3
      • Hey, I own a bunch of PBR, I also own some Lithium.

        If you want a lot of lithium for the money, I recommend Western Lithium.

        They have something like 25 billion pounds of Lithium Carbonate, in US deposits. The resource is historic, not 43-101 compliant, but they will be doing exploration work to upgrade the resource.

        Another way to play it is Western Uranium, which is the original parent of Western Lithium, which is a very recent spinoff of WUC.

        WUC has retained 30% of the shares of WLC "in treasury". So you get a stake in the Lithium if you buy WUC.

        I own some of both. Both are Canadian listed, although Western Uranium also has a pink sheet version.

        If you invest in pink sheet versions of Canadian stocks, take note that some brokers do not trade those very efficiently. I do get good results trading them on TD Ameritrade, though. I think that is probably because the "TD" is Toronto Dominion and thus I believe TD Ameritrade has some good channels for trading Canadian stocks because of the Canadian heritage of its "TD" part of the business.


        It may be premature to be investing in Lithium, but as electric cars gradually get more mainstream, at some point there may be a market mania to invest in Lithium. I've got a few chips on WLC and WUC just in case that happens.

        (WUC is also great as far as their balance sheet, potentially some excellent uranium resources, although their uranium property is not very well understood so far, and they have some large shareholders like Cameco (the #1 uranium company).

    • US used to export oil, now it's importing, China used to export oil, Britain also, they are all importing now. That's why oil is going up,
      also oil hasn't moved for 20 years before the runup, that's why it's going up so much.
      80cents oil sounds good, but that's distant memory, like 5cents a cup coffee or 10 cents burgers, ain't coming back anytime soon.

    • <<At current electric prices, the Chevy Volt will take you 40 miles for the equivalent of 80 cents per gallon>>

      Electricity prices lag increases in hydrocarbons. And power prices are set to keep going up for other reasons besides those related to increases in hydrocarbon prices.

      Don't count on the 80 cents for the future especially if the power is going to be generated by new sources.

      And don't forget taxes. The govt will need to tax your electricity to make up for lost hydrocarbon taxes.

      • 2 Replies to winsabokk
      • You know, Winny, you crack me up. Interest rates don't matter to PBR valuation because... well, you don't want them to. And a rising dollar hurting PBR is not going to matter because... well, it just won't. You then post more nonsense on Brazil's higher interest rates helping the Real and hurting the dollar, and when I told you of the recent history with these currencies and interest rates, instead of admitting you are wrong, you said that just proved how strong the Real was.

        You remind of people who eat this fruit, http://www.iht.com/articles/2008/05/28/travel/28flavor.php?page=1, any sour news on PBR and it is turned into something sweet.

        I should copyright Winny's scientific method. You make your hypothesis, only allow facts in that agree with it, and then if you don't have such facts, you just imagine these facts exist.

        And now we have, <Electricity prices lag increases in hydrocarbons.> That would be great Winny if hydrocarbons were going up in price, but coal and nat. gas prices have fallen, so the 80 cents price is probably too high. And let's not forget about nuclear, geothermal, solar, wind, and hydroelectric. I know you imagine that all electricity comes from hydrocarbons, but the reality is a little different.

        <And don't forget taxes. The govt will need to tax your electricity to make up for lost hydrocarbon taxes.>

        What state do you live in where government doesn't tax electricity? From one site I got this,
        "As a result, on average 11.2 percent of what you pay for your electric power bill goes to state governments for these taxes alone."

        And I wouldn't be surprised for you to not know that two Stanford energy experts concluded wind power was cheaper than coal back in 2001, and that was when coal was at $17 a ton. Now, some coal is selling for $140 a ton.

        And I hate to tell you this, Winny, but MIT researchers have designed a way that solar power can be stored. The problem of solar power plants not being able to provide electricity on cloudy days and at night may have been solved. See the link: http://web.mit.edu/newsoffice/2008/oxygen-0731.html

        That is okay, Winny, you can just imagine electricity from non-hydrocarbon sources will never be viable. In fact, I am sure you and the other posters who gave you five stars have already.

      • Wins,

        That is a very good point on the taxes.

    • Doc -
      While you've hit a home run with your recent short on PBR, this post on the Volt is a bit more of a swing and a miss. That is, if you are saying the Volt, as it currently exists poses a substantial threat to current cars, and by extension, the demand for oil, I disagree.

      The Volt looks to come in somewhere in the $35-40k range for a car that puts you on a 40 mile string. Gas is going to have to be a lot more than $4 for the long term economics of Volt ownership to compare well to something like a Honda Fit, at around $15k and 40 mpg. Giving a 10% time value to my money, which seems appropriate, my Fit's gas cost will never catch up to the purchase and operation costs of a Volt.

      GM is giving it all they've got, but still struggling with the battery technology and battery life issues. The latter issue may have a huge impact on the long term economics. It makes little difference if you get 80 cent per gallon equivalency if you have to spend 5-10 grand for a new battery pack mid-life in your ownership.

      I'm pulling for them to succeed, it would be a very good thing if an electric car was perfected (and broadly affordable). But I wouldn't confuse that hope with the facts as they currently exist.

      Have you read this Atlantic article? It's pretty balanced.
      http://www.theatlantic.com/doc/200807/general-motors

      • 1 Reply to petroglyph56
      • It almost moved me to tears. I grew up in the Detroit area, and I just got back from Michigan a week or so ago. I can tell you that the people of that state are as hard working and kind as anywhere. It is a shame that that GM and its unions have been so instrumental to the state's downfall.

        That said, the Chevy Volt project is the type of thing that I would love to work on. The Chevy Volt is not just a car, but it is what is best about America, doing what others say is impossible. And if it works as designed, we are talking about a car that could fundamentally change American foreign policy.

        As far as the all or none scenario you are desribing with electric cars, it does not have to be like that. First off, most of the world runs on 220V plugs, which means charging the car will take half as long as here. In addition, oil consumption only needs to drop by 10% for the world dynamics to change. That can happen with better MPG alone.

        So maybe the Volt takes three years to build instead of two. What is key to me and what keeps the Saudis awake at night is the development of viable alternatives to oil/gasoline. PBR isn't going to see its big fields come into play for at least ten or twelve years. The world and the U.S. do not have to eliminate oil consumption but rather eliminate the increase in demand and then start lowering total demand. That will send oil prices down.

        The best part of this article was IMO this though, <“The one thing I care about is getting off imported oil,” he told me in December, over dinner in Detroit.>

        I couldn't believe a chairman of GM, the company that made Hummers, would ever say something like this. To make this statement eight years ago, he would have been met with disbelief. Now, if we can only get a president to make this a national goal.

        This was the second day in a row of crazy volume on the Sept. 50 and 55 calls. What the options market is telling us that there is going to be big news on PBR prior to the third Friday in September. I hope you take some of those large gains off the table then. Be well, my friend.

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