Inflation be Damned

[K Graham]

Incidentally I was at Costco last night getting gas for my Ford Ranger when some long bearded hick pulled up to the pump behind me in one of those gigantic 4X4s that are a few feet off the ground. He immediately started talking smack to the COSTCO attendant about the price of gas. "I'm about tired of this BS.... Biden.... you know it was $4 a gallon under Obama too." The attendant seemed disinterested in a political debate, but I laughed out loud in my car to make sure he heard me. He said, "what you don't believe me"? I yelled back "gasoline was well over $5 during Bush's last year, and it dropped below $1.80 in 2016 which was Obama's last year in office. This is just market forces at work that have nothing to do with who is President." He made some kind of sarcastic remark about me being a Libtard, at which point I got out of my car and started walking towards him with a grin on my face. "What was that?"

He got back in his 11 mile per gallon truck and didn't say another word. I really don't get it. Gas prices were as low as $1.76 under Obama and as high as $3.90. That dropped in price throughout his tenure. But people only remember him as the $4 gallon president. Meanwhile, prices were as low as $1.87 (very briefly for like a couple of weeks during the initial COVID shock) during Trump but it also jumped 62% within his first 18 months from the time he took office through June of 2018. But people have the audacity to call him the "President who gave us $1.80/gallon gasoline." Give me an effin break. The only reason it plummeted to $1.80 in Spring of 2020 was because he crashed the economy the same way the last Republican President did.

As soon as the Tesla Cybertruck becomes available I'm making the switch.

[K Graham]

For people who don't understand why there is little incentive for countries like Mexico or Saudi Arabia to produce more oil.

If I can sell you a gallon of milk for $3.00, then what is the incentive by producing more milk if that means I'll be selling it at $1.50/gallon? I'd literally have to produce twice as much to make the same amount of profit.

[Gadianton]

How much did you any of you invest in green energy alternatives to fossil fuels?

It's a good question, although you probably need to adjust your understanding of asset pricing away from whatever it is they teach on Fox Business. One of the right-wing guys on my walk is a retired guy who watches Fox all day long, and would give me tips based on what he saw on Fox Business. A prime example is that he used to advise me to invest in green energy because Fox's backhanded way of sticking it to "liberals" was to tell its viewers to go all in on green stocks if Biden gets elected because he's going to run the national debt to the stars pumping money into green energy.

First, understand that theoretically, the price of a stock = the net present value of all future dividends. In theory, if a company is going to make more money in the future such that it can pay a bigger dividend to its shareholders, the price of the stock increases proportionally. In reality, you'll starve to death before you'll ever afford of loaf of bread from your six figure investment in Tesla in terms of dividends. Companies, in theory, that believe they have tremendous future prospects, instead of paying you a dividend, reinvest that money back into the business. High-tech, including most of the green energy space, are all "growth" companies that expect to make the real money in the future. This hope in the future gets pretty extreme, so much so that it's not just a matter of reinvesting dividends, but continuing to suck money out of investors in the form of secondary stock offerings (diluting the investment of extant shareholders) that they burn in operational costs and new ventures. Some high-tech companies are so future-use, that they are dubbed "ghost companies" because they've never made a profit, have little prospect of ever making a profit, but yet investors continue to fuel them with cash inflows on the chance that one day fuel cells are viable and then that little company who was first to the table becomes the next Apple. Don't you wish mom and dad would have given you 10$ in Apple stock one year on your birthday as a child rather than that firetruck?

Oil stocks are on the other side of the broad division of "growth" and "value" stocks. On the value side, the company might be making money and have a stable future, but doesn't have the unlimited prospects that high-tech companies do. To compare: the price-to-earnings ratio of Tesla is 171 and Exxon is 10. Go back to that original equation. The theoretical "fair value" of a company where price is justified fully by earnings would be a P/E of 1. True value companies have P/E less than 1, meaning their earnings exceed what the market is willing to pay for the stock.

Now just as you're suspecting I might be telling you that oil is undervalued and green energy overvalued, the discussion is going to shift in an unexpected direction. Interest rates. Growth companies are sensitive to interest rates. If interest rates keep getting lower, then growth companies have access to loans on terms that will compound profitability, making their net present value even higher, and there is also less incentive to invest in low-risk assets like government bonds, and so more money goes into stocks. From 2018 until early 2021, interest rates were falling through the floor, and so growth stocks, including high-tech stocks, which includes green energy stocks, were going through the ceiling consuming the by-product of low interest rates. A fair comparison might be that Tesla stock has been consuming low interest rates the way that oil stocks consume the underlying price of oil.

Comparing "green energy" and "oil stocks" is apples to oranges. You're comparing high-tech growth companies sensitive to interest rates to what's for the most part, a matured industry, oil production, that happens to be sensitive to a commodity price, oil. You could as well be making some great returns on Lithium mining, which is a component of green stocks. With the interest rate crunch, it seems like any materials and commodities are going to do better than tech for a while. But this is probably a temporary situation, and in the coming months or years, high-tech will once again rule. So while I don't have "green energy" at the moment, believe me, when I think interest rates are done correcting growth stocks, I'll be happy to go there.

One more thing: you want the US to go green, Ajax, trust me. You don't want America to be an energy exporter like Donald Trump says. An important concept in economics that most right-wingers today haven't heard of is called comparative advantage. A long time ago, A guy named Nikola Tesla once got depressed, was broke, and went out digging ditches to make money. With his energy and focus, I have no doubt he was a fantastic ditch digger, and could probably dig ditches better than most of the guys on his crew. In other words, Tesla had an absolute advantage in ditch digging and electrical engineering, he could both dig a ditch and invent polyphase current better than the guys on his crew. But his crew members had a comparative advantage in digging ditches, because the opportunity cost of not working on polyphase current and wireless energy transmission was exceptionally low, while for Tesla, the cost of digging a ditch at the expense of exotic inventions was exceptionally high. We might be able to mine oil better than Syria, but they have a comparative advantage mining oil because they aren't going to revolutionize fuel cells anytime soon, whereas America has the aptitude for revolutionizing technology. Look at Dubai, and the extremes these oil Sheiks are going, to find a way out of the trap they are in as energy exporters.

[Hawkeye]

I give it another decade when EVs take over the market completely and the price of gas drops below a dollar because no one wants gas anymore and Republicans spin it in a way to take credit.

Let's pray this prediction on gas prices is more accurate than what you predicted gas prices and inflation to be when the Democrats took of over the House, Senate, and Presidency early last year.

The only reason we've been spared hyperinflation, $8/gallon gasoline, the end of the filibuster, and Puerto Rican statehood as Fox News predicted is Joe Manchin. Stagflation, $5/gallon gas, being forced to buy oil from Russia, a disastrous withdrawl from Afghnaistan is really bad, but without Joe Manchin and Kyrsten Sinema, it could have been just as bad as Fox News predicted.

[K Graham]

I give it another decade when EVs take over the market completely and the price of gas drops below a dollar because no one wants gas anymore and Republicans spin it in a way to take credit.

Let's pray this prediction on gas prices is more accurate than what you predicted gas prices and inflation to be when the Democrats took of over the House, Senate, and Presidency early last year.

The only reason we've been spared hyperinflation, $8/gallon gasoline, the end of the filibuster, and Puerto Rican statehood as Fox News predicted is Joe Manchin. Stagflation, $5/gallon gas, being forced to buy oil from Russia, a disastrous withdrawl from Afghnaistan is really bad, but without Joe Manchin and Kyrsten Sinema, it could have been just as bad as Fox News predicted.

All I got from this was that FOX news sucks as always with their fear mongering predictions.

[Hawkeye]

but they have a comparative advantage mining oil because they aren't going to revolutionize fuel cells anytime soon, whereas America has the aptitude for revolutionizing technology.

We do, huh? So if you're not buying green energy now, who is? In the meantime, how does the green energy company not go bankrupt?

Would you agree with K Graham that we'll all be driving electric cars in 10 years?

[canpakes]

… being forced to buy oil from Russia, …

Instead of bitching about renewables and then bitching about dependency on fossil fuels, be part of the solution, not part of the problem.

In 2021, the US imported an average of 209,000 barrels per day (bpd) of crude oil and 500,000 bpd of other petroleum products from Russia. That’s 3% of US crude oil imports and 1% of the total crude oil processed by US refineries. By contrast, Canada provides 61% or our imported crude, and 10% comes from Mexico.

Why import Russian fuel? Because it helps keep fuel costs lower along the East coast. Where you live.

Now, Atlanticmike wants you to give up your car to help with this problem, seeing as you’re complaining about imports from your bud Putin. But, you don’t have to go to that extreme, in my opinion. Just drive less, and help out America.

From the American Fuel and Pettochemical Manufacturers Association:

Why do we import from Russia?

U.S. West Coast (USWC) refineries rely on imports of light sweet crude oil from other countries, including Russia, because access to U.S. produced light sweet crude oil is challenged by geography, transportation and logistics.

Our refineries in the U.S. Gulf Coast (USGC) import heavier crude and unfinished oils from Russia that our complex refineries can transform into other products including gasoline, diesel and jet fuel.

Gasoline and diesel represent only a small part of Russian imports to the United States, largely going to the East Coast. The U.S. East Coast is reliant on foreign sources of refined product due to lack of local refining capacity and infrastructure to economically move products from refining centers along the USGC to markets along the eastern seaboard.

Why have Russian imports increased?

In 2021, increased Russian imports to refineries in California and Washington state have helped offset lower volumes of light sweet crude imports into California from other countries—notably Nigeria—and lower volumes of U.S.-produced crude oil shipped by rail to Washington.

Increased imports of crude oil to the USGC region in 2021 were largely driven by disruptions to U.S. Gulf of Mexico oil production caused by Hurricane Ida and have since declined.

And, since 2019, U.S. refineries have increased imports of unfinished heavy oils from Russia to help replace heavy sour crude from Venezuela that U.S. refineries can no longer import.

If Russian imports are restricted, what other options do U.S. refineries have?

Although not as cost effective as current imports from Russia, particularly heavy fuel oil, additional heavy crude supplies from Canada and countries within Latin America could replace imported Russian crude. Restrictions on the availability of Russian crude to other countries could also have significant impact on crude oil supply patterns and costs.

https://www.afpm.org/newsroom/blog/oil- ... -explained

[canpakes]

Would you agree with K Graham that we'll all be driving electric cars in 10 years?

No. The market can’t meet that demand in either new or used car capacity. As well, charging infrastructure expansion doesn’t support that timeline.

Automakers are expecting that half of all new auto sales will be electric cars by 2030, though, so we definitely seem to be headed in that direction.

https://www.cnbc.com/2021/11/30/auto-ex ... shows.html

Automotive executives think more than half of their sales will be electric vehicles by 2030, in line with President Joe Biden’s EV sales goal, according to a new survey released Tuesday by accounting and consulting firm KPMG.

While estimates varied widely from more than 20% to about 90%, the survey on average that executives expect 52% of new vehicle sales to be all-electric by 2030. The same amount is expected for Japan and China, according to the survey which polls more than 1,100 global automotive executives.

The results may be surprising to many investors and industry onlookers. The adoption rate of electric vehicles in the U.S. remains far behind other countries such as China. Even when Biden announced the EV sales target in August, which also counts plug-in electric hybrid vehicles toward the goal, major automakers Ford Motor and General Motors only committed to a goal of between 40% and 50% by 2030.

Automotive forecasters and analysts also have said while they agree electric vehicle adoption will be rapid, the industry likely won’t hit Biden’s goal.

KPMG said there are important economic assumptions behind the findings in the survey. Seventy-three percent of respondents expect that EVs will reach cost parity with internal combustion engines by 2030. And while 77% believe EVs can be widely adopted without government subsidies, 91% said they still support such programs.

“There seems to be more general optimism toward EVs than even 12 months ago. This is probably due to the billions of dollars of freshly committed capital and the bevy of new vehicles coming into the market. That said, our survey shows a very wide range of opinions on 2030 market share,” said Gary Silberg, KPMG global head of automotive.

Access to charging stations, specifically rapid charging stations for longer travels, remains a hurdle to EV adoption for many consumers. KPMG found 77% of executives expect consumers to require quick charge times of under 30 minutes when traveling.

In the U.S., less than 20% of existing public EV chargers are fast chargers, and many of them can’t charge a vehicle to 80% in 30 minutes or less, according to KPMG.

[ajax18]

Europe has invested expoentially more in green energy than the US. So far all that has done is make them dependent on Russian fossil fuels. Where's the comparative advantage in that? You can't change basic science no matter how much money you throw at a problem. Things are changing. Europe is actually investing their military again.

[Jersey Girl]

… being forced to buy oil from Russia, …

Instead of bitching about renewables and then bitching about dependency on fossil fuels, be part of the solution, not part of the problem.

In 2021, the US imported an average of 209,000 barrels per day (bpd) of crude oil and 500,000 bpd of other petroleum products from Russia. That’s 3% of US crude oil imports and 1% of the total crude oil processed by US refineries. By contrast, Canada provides 61% or our imported crude, and 10% comes from Mexico.

Why import Russian fuel? Because it helps keep fuel costs lower along the East coast. Where you live.

Now, Atlanticmike wants you to give up your car to help with this problem, seeing as you’re complaining about imports from your bud Putin. But, you don’t have to go to that extreme, in my opinion. Just drive less, and help out America.

I swear, some of these people can't think past themselves and their own sense of entitlement to have their own way. We here at the homestead have been talking about cutting off Russian oil for the past few days and are just waiting and hoping for it. We'll drive less just like we did during the freaking gas shortages and rationing in the 70's.

God help us if we have to sacrifice a small portion of our so-called lifestyle for the good of the whole. How horrible that would be!