Arjun, while I agree our CAFE standards are a sham, I think it’s unwise to use Japan as a comparable. I drive a lot between CO, IL and FL. Lotta farm country out there, that needs Ford F-450s to tow cattle, horses, hay etc. I’d even throw in sprawling US suburbs with a lot of SFHs that need maintenance/rehab and thus contractors with real trucks. Japan is population dense in high rises in mega cities. Very different. Similar to point made in a recent Veriten podcast that Japan will never have much wind or solar due to mountains and lack of Continental Shelf. Versus US build-out. Sometimes direct comparisons cannot be made. Thanks for your efforts.
Tom, my point on Japan is merely that they, like Europe, have been better on energy efficiency, in particular mpg gains. That's it. That said, the vast bulk of American's don't have to drive SUVs....most choose to. Some of course do need to drive pick-up trucks and SUVs as you note in your example.
Thanks Arjun for the big questions updates! I have a feeling the Debt Ceiling negotiations have a better than even chance of leading to an economic debacle. Given the posturing I've heard from the Republican Freedom Caucus (unless the House bill goes to the Senate-no deal) and the progressive Dems (no negotiations-use the 14th Amendment), so even if they get a deal next week, I wonder if they'll be able to get the votes in the House and the Senate to pass any deal, given how far apart the 2 sides seem to be before 6/1/23 (assuming that is the real X date, as Treasury is supposed to update us next week). Then assuming the debt ceiling is eventually solved, I've seen estimates Treasury has to sell about $1.5 trillion in bonds per year for the next several years, just to pay for the existing deficit which would be a liquidity drag, unless the Fed goes back to bond buying in size. Simply "refilling" the TGA should cause a liquidity drain over the next several months. The mid size banks are cutting lending, as many are upside down on their loan books and need to de-risk. Then there are the long and variable lags of the interest rate hikes by the Fed. While nobody can predict the future, I'm presently leaning towards a "hard landing" scenario, albeit it could take a while to manifest and create reinforcing feedback loops. So I'm wondering how that potential macro scenario would impact trough prices/profitability for the oil companies? It also seems to me that the necessary capex spending to maintain supply would likely be put off for longer in such a scenario, which would lead to bigger supply problems in the future. Any thoughts?
Thanks James. I think my "Market Corrections, Jimmy Carter,...." post from 8/20/22 captures my perspective well. Energy not immune from recessions...in fact, oil prices are likely to get hit. But doesn't resolve long-term challenges in a rebound. Much like you are suggesting. I would expect trough profitability to be significantly better than 2020 or 2015-16.
Regarding timelines for EV adoption, James Farley's QA at Bernstein was very informative.
https://seekingalpha.com/article/4608516-ford-f-presents-bernstein-strategic-decisions-conference-company-call-transcript
thanks for highlighting Farley's remarks.
Arjun, while I agree our CAFE standards are a sham, I think it’s unwise to use Japan as a comparable. I drive a lot between CO, IL and FL. Lotta farm country out there, that needs Ford F-450s to tow cattle, horses, hay etc. I’d even throw in sprawling US suburbs with a lot of SFHs that need maintenance/rehab and thus contractors with real trucks. Japan is population dense in high rises in mega cities. Very different. Similar to point made in a recent Veriten podcast that Japan will never have much wind or solar due to mountains and lack of Continental Shelf. Versus US build-out. Sometimes direct comparisons cannot be made. Thanks for your efforts.
Tom, my point on Japan is merely that they, like Europe, have been better on energy efficiency, in particular mpg gains. That's it. That said, the vast bulk of American's don't have to drive SUVs....most choose to. Some of course do need to drive pick-up trucks and SUVs as you note in your example.
Hi Arjun. Big news for you. "Five major insurers quit industry net zero initiative"
https://www.ft.com/content/4940831b-72ec-459d-aaee-0d86fb7593df
definitely great to see some signs of sanity prevailing!
Arjun you often talk about the need for US oil and gas producers to reduce methane emissions. Yesterday Bloomberg reported that their methane emission intensity fell by almost 30% between 2019 and 2021: https://www.bloomberg.com/news/articles/2023-05-23/intensity-of-methane-emissions-by-oil-and-gas-industry-declined-report
Thanks Tian. Yes, there is progress being made.
Thanks Arjun for the big questions updates! I have a feeling the Debt Ceiling negotiations have a better than even chance of leading to an economic debacle. Given the posturing I've heard from the Republican Freedom Caucus (unless the House bill goes to the Senate-no deal) and the progressive Dems (no negotiations-use the 14th Amendment), so even if they get a deal next week, I wonder if they'll be able to get the votes in the House and the Senate to pass any deal, given how far apart the 2 sides seem to be before 6/1/23 (assuming that is the real X date, as Treasury is supposed to update us next week). Then assuming the debt ceiling is eventually solved, I've seen estimates Treasury has to sell about $1.5 trillion in bonds per year for the next several years, just to pay for the existing deficit which would be a liquidity drag, unless the Fed goes back to bond buying in size. Simply "refilling" the TGA should cause a liquidity drain over the next several months. The mid size banks are cutting lending, as many are upside down on their loan books and need to de-risk. Then there are the long and variable lags of the interest rate hikes by the Fed. While nobody can predict the future, I'm presently leaning towards a "hard landing" scenario, albeit it could take a while to manifest and create reinforcing feedback loops. So I'm wondering how that potential macro scenario would impact trough prices/profitability for the oil companies? It also seems to me that the necessary capex spending to maintain supply would likely be put off for longer in such a scenario, which would lead to bigger supply problems in the future. Any thoughts?
Thanks James. I think my "Market Corrections, Jimmy Carter,...." post from 8/20/22 captures my perspective well. Energy not immune from recessions...in fact, oil prices are likely to get hit. But doesn't resolve long-term challenges in a rebound. Much like you are suggesting. I would expect trough profitability to be significantly better than 2020 or 2015-16.
Thanks for the update, Arjun. In the context of both inventory and being low on the cost curve, one has to admire some of the Canadians.
thank you and indeed! Big fan of Canadian oil & gas sector.