It’s still growing from an incredible tiny base, so of course it is growing more on a percentage basis. I don’t really follow the solar industry well and have a hard to gaining much from websites like you posted, but I would just say look at the raw data that the EIA puts out.
For the 12-month period ending 11/30/15 compared to the 12-month period ending 11/30/14, natural gas grew from 27.47% of the total net electric generation to 32.07% while solar grew from 0.43% to 0.63%. Solar is growing because it is an emerging industry. Natural gas grew because of coal to gas switching in a low gas price environment.
Of course solar will grow. The entire pie will grow, and I suspect that solar’s share of that pie will grow as well. I highly doubt it will surpass natural gas’s share of the pie in our lifetimes.
Also, keep in mind the following regarding natural gas. We are just now in 2016 starting our first material liquified natural gas exporting (and LNG is hurt by low oil prices). Our pipeline exporting of natural gas to Mexico also has exploded in recent years.
Also, the growth of the natural gas liquids production has been enormous recently. Think propane, butane, ethane, pentane, etc here. Propane exporting has grown about 700% in the past 5 years. And we’re not exactly slowing our usage of plastics either.
It also seems to me that wind made far more of an impact at gaining market share compared to solar even if the solar growth rate has actually been higher. I think since 2005, wind has grown from about 0.4% of electricity generation in the U.S. to around 4.5% while solar has grown from about 0% to about 0.6%. Now at the same time, natural gas has grown from about 19% to about 32%. So the growth rate for solar dwarfs wind and wind dwarfs natural gas. I have a hard time looking at the numbers and thinking that natural gas is some dying industry though.
I don’t think natural gas is a dying industry- that’s coal. The really interesting thing is that, even with these low natural gas prices and with solar’s low market share, in absolute terms solar added more GW of capacity in the US than natural gas in 2015.
Once US exports of LNG really get underway, I expect the US price of natural gas to rise more in line with global prices, similar to the way WTI rose to meet Brent when the export ban was lifted. These higher prices will only make solar more competitive, at least in the US.
Speaking of long term trends, thesearticles predict that increases in ev penetration alone will cut demand for oil enough to cause the kind of 2 million bbd glut we are now seeing by 2023.
It is speculation, yes, but the implication is that the oil industry is in big trouble from next decade to pretty much forever.
Solar is heavily subsidized at this time. That’s more feasible in terms of growing solar from tiny to small, but as solar gets bigger and bigger it will be more expensive to subsidize it, and you would expect the subsidies to get cut back. The theory is that this will be offset by advances in solar effifciency, but the bottom line is that you can’t extrapolate from present trends to the future.
But if you want to speculate, then you can speculate that the oil industry itself will also increase its efficiency and be more profitable at lower prices.
Doesn’t that just show that installed capacity isn’t a very useful measure of anything? Solar supposedly added more capacity but added something like 1/23rd as much actual generation. I don’t know that capacity really means anything then. Maybe you have homes adding more capacity then they would ever actually use and it inflates the numbers. Not sure, as I don’t really follow that market at all.
Alternatively couldn’t exporting of gas just lower the global prices? You do have to also factor in transportation and liquefaction costs. Should be far more expensive for LNG than locally produced gas.
Also, the WTI to Brent relationship hasn’t really changed much. Brent is still a small premium to WTI. Exporting should prevent future blowouts in the differential.
There’s a base decline for oil production of something like 4 to 5 million barrels per day year over year. Demand has been growing 1 million barrels per day. With pricing low, it grew at more like 1.7 million barrels per day last year. It will be something like 1.2 million barrels per day this year even with a slower China.
My point is that even if electric vehicles cut into future demand growth by 2 million barrels per day, we would still need to produce more in 2023 than we do today plus offset the decline of 5 million per day that occurs every year. Price has to be high enough to incentivize capital expenditures to bring about a balanced market.
Cutting into demand growth by 2 million barrels per day over an 8 year period is not equivalent to a 2 million barrel per day oversupplied market.
Well… the ITC did get extended through 2020, so we know that much. 2020 is the time when pretty much the whole world is expected to have reached solar grid parity, at least according to my ever-aging projections. Gains in efficiency do seem to be coming along though, close enough to Swanson’s Law to call a good prediction- read some earnings reports from successful solar companies and you will see that earnings beats are often a result of cost reductions.
So, through 2020 we get continued subsidies + cost cutting, a nice setup for profits. After 2020 the ITC is slated to be cut from 30% to 10% IIRC, though costs for solar installation should have decreased by more than enough by then to make up for the difference. Still, assuming gov’t policy follows this path, we can expect the solar industry to adapt to a ‘new normal’ in 2021, but not be destroyed by it, not even close.
I am not sure which trends you are suggesting cannot be extrapolated into the future. Successful solar companies continue to increase their manufacturing capacity, justified by years-out and growing project pipelines. I don’t see what slows solar’s growth near term or big picture (besides eventual saturation)- everything seems to be in its favor.
I agree that at some point the subsidies could become too much. OTOH, mature as the fossil fuels industry is, it remains heavily subsidized itself, and in more various and subtle ways than solar. As time goes on the solar companies may figure out how to bend governments to their wills the same way the fossil interests have.
I suppose. Will oil sands ever be profitable at $40/bbl? That would really be something. Still, an everlasting drain on demand seems a problem even with industry-wide gains in efficiency- all parties will be fighting for a smaller (or slower-growing) pie and no one will give up share willingly. OTOH you can point to the profit formula I used for solar: continued subsidies + cost reductions = profit. I did say I would trade oil after the bottom…
I don’t think the EIA is inaccurate, I just think your cite and my cite are referring to different models of power generation. The EIA is referring to generation at “Utility Scale Facilities”, whereas my cite is referring to total installation capacity. Remember, solar posits a new, distributed model of power generation that threatens to disrupt the centralized utility model. Focusing on only utility-scale generation omits residential- and commercial-scale solar installations, which have been the largest shares of solar installations until recently.
The standard back-of-the-envelope approach to “solar capacity”, as I understand it, it that… say you have a panel rated for 300 watts per hour capacity. You set it out and hook it up- you should expect about 1/3 of a day of actual generation, 8 hours, in North America. Better at the equator, worse in Canada.
So for added solar “capacity” to match added natural gas generation, we would need it to be 3x gas’ capacity addition (not accounting for what % of “natural gas capacity” is actually realized as generation).
Personally, I expect both. Nat gas costs way more internationally than in the US IIRC. The global cost will fall but the local price in the US will rise. Hard to draw a direct analogy to the oil industry, I don’t know what % of the world’s LNG demand can be met by the US or how the new availability will affect LNG consumption patterns, among other factors. What do you predict?
Interesting. I followed Brent after the lifting of the export ban, and look at the 3-month chart.
Brent crashed below $30 just like WTI did. But since I quit paying attention, Brent has pulled back ahead, you are correct, though at a significantly smaller premium than before. Do you think Brent will be able to maintain its premium going forward?
One the one hand, cutting 2 million bbd of demand over 8 years is, in a mathematical way, exactly the same as adding 2 million bbd to today’s market. But of course, from the not-dunce perspective, other factors are in play. 8 years gives shrewd players time to act at the very least, whereas the current glut seems to have surprised pretty much everyone (?).
Anyway, ffwd to 2023. Evs have cut oil demand by 2 million bbd. They are on track to account for ~35% of global vehicle sales by 2040. Which way does the oil market go, long-term?
With a $10 commision I spent $610 for 4 COP calls, strike 45 expiring Jan 2017. This isn’t stealth bragging; it was a total fluke, though inspired by this thread.
Thinking that the stock-price bottom was likely to precede the commodity-price bottom, I bought the 4 calls on Feb 24, when COP was selling for $32+. Yes, yes, it would have been much sweeter if I’d bought 40 contracts instead of 4, but I don’t think I’ve ever done anything like this and I just wanted to get my toes wet.
I sold one contract Thursday for $2.29 and 1 Friday for $4.20. The former was the low price on Thursday – it was a limit order I’d set Wedensday and which executed early Thursday as the stock soared. The $4.20 price on Friday was the day’s high.
So I could sell the two remaining contracts at $4 each, for a net $810 profit on my $610 gamble. Whippeeee!
But they don’t expire for over ten months. I hope to hold on and maybe get more. If they expire worthless, the two I’ve sold already will make the whole thing a wash. (I did this just on a lark or a hunch. The 55 call is still a little cheaper than the 45 call was when I jumped on, but that seems like “a bridge too far.”)
Any recommendations for when to cash out my two remaining contracts?
This advice is pretty much pure juju derived from my past experiences. That said: When I have been in a position of greater than 100% profit and did not take a significant chunk off the table, hoping for still greater profits, I have regretted it- things have (in my limited experience) tended to always retreat from such lofty gains, leaving me with a partially missed opportunity. You’ve only held these for a few weeks, but 100%+ is a pretty good finish line. If it were me, I’d sell one immediately to lock in the profit and speculate with the last one.
To compare notes: I was watching COP at the time you bought your calls, but believed that oil supply was still too excessive and that oil would fall further (even though I thought COP was hitting downward resistance :smack:). Well, in the past few weeks, COP has surged from ~$33 to $41.12 today. Had I bought, I would be up ~30% so far and met my goal for this thread.
But I didn’t do that. You can see from my comments that I got drawn back into my enthusiasm for solar. I bought 85 shares of SPWR @ $23.375 a couple weeks ago. I believe this one can touch $40 or better by next year, but so far I am up only ~5.5%. I’ll take it, but looks like you win this round. This experience convinced me to learn something about options trading, so thanks for sharing.
It’s not the same. In one scenario, we currently have supply at 96 million barrels per day and demand at 94 million. In the other, in eight years we have supply at some unknown number and demand at something like 102 million barrels per day (instead of 104 million barrels per day if EV hadn’t cut into demand growth by 2 million barrels). For all we know, the world will have struggled to keep up with demand growth during that eight-year period and prices will be significantly higher.
Well, it depends on the supply / demand balance at that point. A commodity should trade at close to the cost of the marginal unit of production. What if 65% of 2040 vehicle sales are gasoline/diesel and that it is double 2016 total vehicle sales. The entire pie is getting larger. We’re using a lot more energy in total. The alternative fuels are certainly cutting into demand growth. That’s not the same thing as causing a decline in demand.
I’m gaining exposure to a possible bounce in oil by purchasing distressed bonds in small, energy E&P companies. I’ve got a basket with a handful of different names. Some might go bankrupt, but if one or two survive, I’ll do quite well. Many of these bonds are trading as if bankruptcy is already a certainty and are trading at less than 15 cents on the dollar. At the same time, some of the same companies preferred shares are trading at higher prices. It doesn’t make sense. There are quite a few of these dislocations across energy and shipping names. This is not an efficient market.
Yes. I’ve been actively trading bonds, preferreds, and common shares against each other. Keep in mind there are issues with liquidity and short stock locates to be aware of. Also, be absolutely sure you know what you’re doing. This is not investment advice.
I almost did something of this sort after NGLS agreed to be purchased by TRGP for .62 shares of TRGP for every NGLS share. For a long time NGLS was selling at a discount of about 9%-10% to the acquisition price, and - if you believed (as I did) that the deal was going to go through, you could lock in a substantial profit by shorting, say, 620 shares of TRGP while buying 1,000 of NGLS (plus some profits on the distribution imbalance). But I didn’t pull the trigger, and that passed by.
This was the problem with your OP, as several posters pointed out.
The price doesn’t rise in response to current conditions. It rises in response to anticipated future conditions.
Production has not yet declined, but it’s anticipated to decline. The market is (in part) responding to this anticipation.
Of course, the anticipated cuts (whether in US production or OPEC-related) may not pan out, in which can the market would adjust expections and pressure prices back down again.
– it was a limit order I’d set Wedensday and which executed early Thursday as the stock soared. The $4.20 price on Friday was the day’s high. 
