[dado3212]

For the record, their market cap is also greater than "Australia's Woodside Petroleum, Chevron, Exxon Mobil, Imperial Oil, Royal Dutch Shell, Shell Energy North America, Canadian Natural Resources, ConocoPhillips and French group Total [combined]" [1], so they're also valued kind of crazy compared to energy companies...and that was in January 2021 before the most recent spike. Sure, part of that is faith in renewables. But in any fair comparison their stock price is still a little confusing.

[1] https://www.tesmanian.com/blogs/tesmanian-blog/teslas-market...

[AtlasBarfed]

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]

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.

[ZeroGravitas]

That 90% is much easier to replace than you think because its mostly wasted as heat and inefficiency.

Once you factor in the fossil fuels used to extract fossil fuels it all topples pretty quickly.

The main source of trouble will be people ignoring the issue until it becomes urgent and not planning a smooth transition, global procrastination rather than the actual task itself.

[tappio]

I like your optimism. I just don't see how we can produce and transport food, electronics, and specifically windturbines, solar panels and batteries on a global scale without using massive amounts of fossil fuels.

Actually, I would love to see a the real "energy footprint" of a solar panel. Like, how much mining, transporting, manufacturing and installing the panels consumed energy, and how many days it takes for a panel to produce more energy than the entire operation used. If anyone has such a breakdown I would be really happy to see it. If the numbers are good, maybe the future is still bright.

[ZeroGravitas]

You can find these online, they've been doing them for years. Though maybe note that "energy" isn't really the problem, it's the greenhouse gasses that have sparked this changeover. "Carbon payback time" is a common phrase. It's now getting into the "this is both cheaper and better regardless of carbon" phase, but it wouldn't have been pushed this hard if the numbers didn't stack up in theory.

[fragmede]

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]

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]

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]

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]

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.

[nebula8804]

I think you are too optimistic about Israel. These other countries can be dropped easily but Israel is a huge liability that I don't know how the US will get rid of. I do feel confident that the winds are starting to fly against them slowly but I don't have my hopes up. It will likely be a generational shift that finally does them in but IDK. What do you think?

[mjh2539]

If the US drops Israel someone else will pick them up (like Russia or China or India). The country is developed, produces tons of IP, and is armed to the teeth (and has nuclear weapons).

But this is lala-land thinking. As long as the United States remains on the UN Security Council (which is equivalent to saying as long as the UN continues to exist in any practical form), both Taiwan and Israel will remain our client states.

[philistine]

The incredible thing is a calcified Russian system with access to way too many nukes collapsed within our lifetimes and the West adequately prevented nuclear disaster. We ended up with the current farce of a government as a byproduct, unfortunately.

[riversflow]

Yeah I'm not a domain expert on decarbonization or anything, but from what I've seen on the industrial manufacturing side of things in the US, electricity prices would have to be consistently very low for the cost of re-outfitting existing natural gas heating systems with electrical ones to make sense without fairly punitive carbon taxes, and even if you pass carbon taxes in first world countries to make it "worth it" to retrofit with electric heating, most of the domestic manufacturing will just go belly up without tariffs--good luck getting developing economies to enforce the environmental standards most of us would like to see on their own, and good luck getting the ruling body politik to think tariffs are a good idea. I ran the number on our facility and moving from natural gas boiler heating to electric would have been iirc something like 8-12x more expensive, even before buying the very expensive heaters, and I'm fairly certain that for higher temp operation(our steam system was low pressure) it would be even more expensive.

There are a couple other stand out problems I see with getting the industrial/manufacturing sector off fossil fuels. First, I don't think that we have the grid infrastructure to replace natural gas with electrification at the same time we do cars[1][2]. From what I understand its something of a problem already for electric car charging, and industrial use of gas for heat (and saying nothing of trying to replace the petrochemical industry, interesting read on all-electric ammonia production [4]) is pretty staggering as well; electric transmission is some substantial multiple less efficient then direct heating with Gas. I think this is kind of the opposite of electric cars which tend to be more efficient than ICE, but again I'm not an expert and am not at all sure that is true of cars, just my impression which seems reasonable intuitively, as turning fuel directly into heat has essentially 100% efficiency while turning fuel into motion can only be some fraction.

Second, super cheap electricity is extremely fungible, so it becomes a prime candidate for Jevon's Paradox[3]. I feel that there would have to be some "unfair" power rates for heating for electricity to supplant natural gas unless we implemented massive carbon taxes, in which case return to my first point about off-shoring.

I can see how it would theoretically make sense to put industry right next to large power generation sources, like dams, solar array/ battery installations, or nuclear power plants(lol), but a lot of these operations aren't exactly trivial to move, and our current climate of Environmental regulation makes moving these sorts of things that much more difficult. Also manufacturing requires a not insignificant amount of logistics/shipping so transplanting them to power generation sites has its own set of drawbacks.

All in all, I try to be a techno-optimist, but seriously worry that humanity's ad-hoc system of organization (that's rife with corruption) will be our downfall in this global climate crisis we've created. So far I can't see a way out of this without a breakthrough in power generation and a breakthrough in carbon capture or some other unforseen-by-me break through. Really I just don't see our current tech stack as being capable of getting us out of this mess. So here's hoping that high-temp super conductors bare fusion fruit, and this gallium catalyzed CO2 splitting is the real deal.

[1]https://www.pewtrusts.org/en/research-and-analysis/blogs/sta...

[2]https://www.nytimes.com/2021/01/29/climate/gm-electric-cars-... (has additional good links as well)

[3]https://en.wikipedia.org/wiki/Jevons_paradox (fun fact, I've used duckduckgo for many years now, and this required the rare !g to find without knowing what the paradox was called off the top of my head. my query was: "the cheaper something gets the more it is used", top hit on big G, nowhere to be seen in the DDG results)

[4]https://www.cleantech.com/green-ammonia-potential-as-an-ener...

[kieranmaine]

Air source heat pumps are more efficient than gas boilers so total energy usage would decrease [1]. Running costs are also lower, but installations cost are currently higher.

You would need to generate more electricity, although this could be mitigated through improved insulation and smart control of heating systems (for example turning off the heating for 30 minutes during spikes in usage, assuming the temperature is above a certain level).

[1] https://www.edfenergy.com/heating/advice/air-source-heat-pum...

[riversflow]

I'm not particularly thinking of domestic heat production, I agree that heat pumps (ground source, or a pool if you have it, works even better!) are the future of domestic HVAC. I'm thinking about heating for industrial processes, turning off the factory for 30+ minutes during a useage spike is a minor catastrophe if unplanned, you'd either have to design your shift around it (we had time-of-use power pricing and did this) or just close down. I won't rule out heat pumps as being part of the solution out of hand, but from your source:

>Lower output temperature than conventional boilers – you may need to update your insulation and invest in bigger radiators too

is a pretty big problem when you are trying to heat industrial quantities of things up to industrial process temps at industrial rates.

[fragmede]

- 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]

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]

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]

> 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]

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.

[nebula8804]

>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)

[breakyerself]

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]

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]

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]

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.

[julosflb]

Exactly what Total did: they rebranded themselves few months ago as TotalEnergies...

[grecy]

With many developed countries passing laws to ban the sales of petrol and diesel passenger cars by 2030 or 2035, do all the companies you mention actually have a strong future of growth?

Do you want to buy stocks in companies that have a strong future of growth, or who have always made a lot of money doing one thing, and expect to keep making money doing that same old thing, even though it's clearly not going to last.

While they're not going to die overnight, I suspect they're not going to be worth all that much by 2050, and ~nothing by 2075.

[azinman2]

So if they’re so big now, why can they throw more weight around than energy companies in terms of getting rid of the fossil fuel lobby?

[jjeaff]

Because market cap is just the crazy value investors have attributed to the company. It doesn't mean the company is any bigger or smaller.

[chii]

But it means their cost of capital can be lower - for example, by issuing new shares to capture some of that high market cap. Then they can expand much easier than a competitor who cannot get such good rates for new share issuance.

[ZeroGravitas]

They kind of can.

Example: the australian PM who repealed their carbon tax, is now working with his coal baron buddy on a green hydrogen plant. He's now calling for a ... brace for the irony ... carbon tax to help his new business.

edit: correcting myself, getting two PMs mixed up, Turnbull scrapped new Carbon Tax plans while PM, under pressure from Abbot (who he replaced as PM), who in turn had scrapped an existing carbon tax. Still demonstrates the slow shift of the well-connected politicians to follow the money.

[dangus]

One way to explain this is that “goodwill” is an intangible that shows up on the balance sheet, which must always be balanced. Assets = Liabilities + equity.

Goodwill is on the asset side of the equation.

Basically, Tesla stock owners consider the company to have ambiguous secret sauce of the right employees, IP, brand recognition/reputation that makes it more valuable than its current on-paper business activity.

Or, it’s just a stock that they believe they can find buyers for – a belief which has been proven to so far be true.

[TearsInTheRain]

They are also an innovation engine. You have to value all of the things they havent created yet but will.

[cinntaile]

What part of their market cap is unrealized tech dreams and what part is substance, in the traditional value investor sense, in your opinion?

[vineyardmike]

>unrealized tech dreams and what part is substance, in the traditional value investor sense

Companies like Tesla are not for traditional value investors. Bonds and boring stocks or ETFs serve that purpose.

[cinntaile]

That's just evading the question.

[trhway]

Tesla price to revenue is 20x - a pretty normal for a tech company.

[listenallyall]

Tech companies generally sell software or ad space with near-zero marginal costs. Tesla does not.

[trhway]

Not really. The modern tech companies, FAANG, and many doing SaaS, etc. consume highly expensive labor and consume it while not linear, yet still in some significant correlation to the revenue, thus one can see that they have kind of significant marginal costs. While Tesla's marginal costs will more and more will be dominated by the R&D.

[Bombthecat]

I uhhh you are kidding right? Sounds like those metaverse crypto scams...

[roguas]

Well people can short Tesla. I heard this under evaluation among solo traders. But Tesla is having a lot of money in crypto afaik. So it often may seem, their profit in cryptos increases their total val.