Search TradeFlow


Musings From The Oil Patch – Dec. 5, 2017

The drama of OPEC’s recent Vienna gathering to bless a new oil production strategy was most likely generated by speculators hoping to make a few bucks from oil price volatility in response to rumors about the deal. Would they or wouldn’t they extend the production cut, and for just how long? Would it have the support of Russia? Would the production cut be reduced or increased? The new agreement, which extends the current output cut with Russian support, will run through all of 2018, although it is subject to review in June. While Vienna is hundreds of kilometers from Rome, funny things happened, and we don’t know for a while whether this agreement will be a tragedy or a commodity. In this era of predicting the demise of the global oil and gas industry caused by electric vehicles, it seems that all forecasters openly accept as givens statements by automakers of their new EV models and production plans. Projections and reality are very different animals, and failing to acknowledge those differences is a short-coming of most EV projections. As we have learned, one optimistic forecast moved the oil glut threshold out by five years after they did a careful analysis of the true cost of building EVs.

EV hype has happened many more times than people are aware of. Who knew that EVs were developed in the 1830s? They ruled America’s roads by 1900 with 38% of all U.S. vehicles powered by batteries! They were revived as a solution to U.S. energy needs after the Arab oil embargo in 1973. Today, EVs account for 1-2% of the U.S. fleet. Why should we think they will conquer the transportation space this time? Oh yes, social engineering through government picking and choosing winning technologies explains why. In a media extravaganza, Tesla introduced its electric trailer truck – the Tesla Semi – with delivery of the first ones about two years hence. Maybe what Tesla doesn’t know about how the trucking business works explains why many over-the-road truck drivers dissed the high-tech vehicle. By failing to indicate just how much the truck might cost suggests maybe all the R&D work is not complete. Given Elon Musk’s history of disappointing customers with delivery schedule delays, maybe we shouldn’t expect the Semi to revolutionize the trucking industry just yet.

See Full PDF


This is not an offer to buy or sell securities. Oil investment carries with it very high risks. The information contained within this site has not been nor will it be verified by Envestor First and is subject to change at any time. We are not a United States Securities Dealer or Broker or United States Investment Adviser. Do your own due diligence and consult with a licensed professional before making any investment decisions. Please read our full disclaimer before making any decisions.