
Battery technology may emerge as a trillion-dollar threat to credit markets - perseusprime11
http://www.bloomberg.com/news/articles/2016-10-18/batteries-may-trip-death-spiral-in-3-4-trillion-credit-market
======
narrator
I've surmised from years of reading the economic press that there's really
only one bad thing that can happen in a capitalist economy: bondholders not
getting paid. Heck, lots of commentators argue that war is good for the
economy, a natural disaster is good for the economy, the broken window fallacy
is a mainstay of Keynesian economics. However, bondholders not getting paid is
something that should be prevented at all costs! The federal reserve is doing
$40 billion a month of bond buying with electronically printed money
(quantitative easing) so the bond holders get paid!

"I used to think if there was reincarnation, I wanted to come back as the
president or the pope or a .400 baseball hitter. But now I want to come back
as the bond market. You can intimidate everybody." \- James Carville

~~~
nradov
That's not really how it works. Bondholders don't get paid all the time. This
is priced in and isn't a problem for a capitalist economy unless the actual
rate of defaults significantly exceeds the _expected_ rate of defaults as
predicted by bond ratings.

~~~
pmorici
Massively fraudulent credit ratings on mortgage bonds was one of the things if
not the thing that precipitated the 2008 housing/economic crisis. Your comment
reads like you think bond ratings are mostly accurate but recent history tells
us they can't really be trusted.

~~~
Retric
Less fraud than you might think. It was more the model where house values
would increase or level off not crash, which meant worst case was recovering
X% vs 100+% where x% would still cover the outstanding loan. Which allows you
to slice and dice very low risks loan value from junk, not because most people
are going to pay back, but because the houses have high inherent value.

~~~
pmorici
Their scapegoat was the model. In reality they could probably make a model
that gave whatever rating the client desired. That is the fraud, they weren't
working in the interest of the investors they were working in the interests of
the investment bankers.

[https://www.youtube.com/watch?v=19amWOc1GJ8](https://www.youtube.com/watch?v=19amWOc1GJ8)

[https://www.youtube.com/watch?v=whlzFWwVv98](https://www.youtube.com/watch?v=whlzFWwVv98)

------
riphay
I used to work in energy corporate finance, and this feels like a pretty
alarmist article to me for a few reasons. My logic runs as follows: \- The
trillions in credit are issued by a wide array of energy companies running the
gamut from production, to energy infrastructure, to utilities, etc. \- When a
company is getting credit, the term is significant to the pricing of the
credit. Riskier companies tend not to have access to long-term debt (10
years+); this tends to be open only to companies with more secure revenue
streams (utilities, refineries, etc.) \- By projecting to 2040, the article
assumes creditors won't have a chance to reprice the mosaic of debt many times
over until then. Riskier companies may lose access to credit completely (as
we've seen during the current downturn in oil prices), while others will have
to pay a higher price for their debt. \- If the projections are accurate, this
market will simply shrink in step with the overall market shrinking. And if
past disruptions are any indications, it will be replaced by battery / EV
companies needing credit and suddenly looking a lot less risky. \- The world
doesn't end. Did I miss anything in my logic?

~~~
bbcbasic
> Riskier companies may lose access to credit completely

If a riskier company can't renew it's credit, and in general the money is
getting more expensive won't this lead to bankruptcy for many energy
companies. Those companies won't be able to pay their debt back so ergo the
money has to be written off.

This would lead to higher IR on any old-energy based debt which could then put
even the less risky companies at risk as they need to put more of their
profits into servicing their debt.

There would be a systemic failure. Unlike the housing crisis it will be due to
companies that can't afford their debt in the future, rather than overextended
home owners who couldn't afford the debt from day zero. But the effect could
be the same.

Disclaimer: Armchair economics.

~~~
Retric
Energy companies make up a tiny fraction of world debt. There is over 200
trillion in total debt world wide. You can find many trillion dollar slices of
that that mean next to nothing.

~~~
sunstone
Sure, but there still might be an investing opportunity.

------
SubiculumCode
Here is the libertarian response, maybe: I'm not going to feel we should
protect the oil industry because of potential economic disruption. Winners.
Losers. Free Market. Credit markets are about predicting future trends and
credit worthiness. If creditors do a poor job, so be it.

This argument is generally pursuasive to me most of the time. Should I be
convinced otherwise in the present case. -a layman.

~~~
drcross
That's not a libertarian response, it's a capitalist response, the way
capitalism is supposed to be. We don't (read shouldnt) protect anyone, we only
should step into a free market where we see monopoly.

~~~
ookdatnog
I don't think it's by default bad if the government artificially keeps a dying
sector alive for a while to soften the blow to the families who depend on that
sector for income.

If government intervention can prevent a lot of people falling into
poverty/homelessness at the cost of slightly delaying technological progress,
I think that can be a price worth paying.

~~~
webscaleizfun
At what cost though? I've heard this protectionist argument from a friend of
mine many times before, and it always ends up circling back to his current
employer, who if there had been larger economic/regulatory barriers in his
industry a decade and change or so ago, would likely not exist.

Protectionism has its place, but we should fully evaluate the cost, damage and
benefits created by protectionist policies before implementing them, otherwise
you end up with massively subsidized US corn crushing our NAFTA partner's
agriculture industry, and Chinese Steel being dumped on the US at
significantly lower prices than the US Steel industry can produce said metal
at (mostly due to Chinese state subsidies, just like our agribusiness
subsidies).

~~~
ookdatnog
I fully agree. There are many factors involved in this decision: how many jobs
are at stake? how beneficial is the technology we're holding back for the
population at large? how environmentally damaging is the old industry? how
many new jobs can we eventually expect from the new technology? etc.

Note that I did not claim that protectionism should be the default policy. My
only claim is: it would be silly for a government to refuse to consider
protectionist solutions to certain problems, simply because capitalist dogma
says it shouldn't.

------
Animats
Credit markets dependent on oil survived the "superspike", the decline of
output from several Middle Eastern countries, the rise of US secondary and
Canadian oil production, the substitution of natural gas for oil in power
generation, and the resulting oil glut. Those were fast events, a few years at
most. Conversion to electric cars is going to take a few decades.

Anyway, batteries are not an energy source, just storage. Somebody has to
build generating capacity.

~~~
Gibbon1
I think the idea is batteries enable people to use other sources of energy for
transportation.

Not explained in the article is there is a threshold effect in play here.
Electric cars are probably cheaper on a per mile basis now, but not on a
capital basis. However batteries are coming down in price so fast that within
a decade we may find that electric cars are cheaper on a capital basis. If
that happens, gasoline cars will stop being produced overnight.

Other one that people don't consider as much is that outside the united states
and a few other oil producing countries oil imports are considered to be a
necessary evil. If the governments of those places think that they can run
their transportation infrastructure without oil, they'll switch as fast as
possible and erect very stiff taxes to reduce demand for oil imports. AKA do
the rulers of China like that they need to import oil? No they absolutely hate
that. Which is to say inside the US oil companies have a lot of economic and
political power, outside the US governments hate and fear them.

Both of these means that demand for oil could start falling rapidly. That will
depress the price, any producer that can't economically produce at the new
price will be bankrupt. Any oil exploration business will go bankrupts.

~~~
lightcatcher
> If that happens, gasoline cars will stop being produced overnight.

Some people will still pay for range or range at speed or less charging time.

[http://jalopnik.com/they-drove-a-tesla-from-la-to-new-
york-i...](http://jalopnik.com/they-drove-a-tesla-from-la-to-new-york-in-a-
record-58-h-1699782187) is a decent look at the state of technology. Driving
across the US takes at least 12.5 hours of charging time, and averaged 65.4mph
while ICE record averaged 98mph.

Even when "electric cars are cheaper on a capital basis", the technology will
still be well behind ICE in some ways (and well ahead in others).

~~~
Gibbon1
Deal is when an electric car with 150-200 miles of range is cheaper than a
gasoline powered car, then for the vast majority of people the next car
purchase will be electric or a plug in hybrid (twice the mileage of
conventional). Assume 12,000 miles a year for a mix of cars

    
    
        %   Type             mpg  gal/yr       ext
        50% Electric         --   0            0
        25% Plug in Hybrid   80   150 X 0.25 = 37.5
        25% Non-Hybrid       30   400 X 0.25 = 100
        -----------------------------------------
        Total                                  137.5
    
        100% Non-Hybrid      30   400 X 1.00 = 400
        ------------------------------------------
        100%                                   400
    

So the mix of electric, plug in hybrid and gasoline results in a 2/3 reduction
in gasoline consumption.

And that's in the US. In countries without domestic oil production the choice
will be made for you.

------
ars
Why do they assume auto makers will just sit there and do nothing?

I have seen far too many "projections" that assume nothing will change - they
are always wrong, and thus worthless (unless it's your job to make the
change).

~~~
belltaco
>Why do they assume auto makers will just sit there and do nothing?

Because the hype will be with the new, and auto makers will be perceived as
"old" even if they release electric cars, which will be tough because they're
already behind Tesla.

Everyone wants to have that Tesla, and no one wants a Blackberry even if the
newer versions have touch and have all the features of an iPhone.

It happened in the smartphone industry, with taxi apps etc. etc. It's hard to
shake off widespread public perception short of reinventing yourself which is
possible, but quite rarely seen.

~~~
Animats
Chevy will probably be the largest electric vehicle manufacturer in a year or
two. They're #2 right now, and the Chevy Bolt comes out soon. The Bolt is a
useful car, the price is affordable, it has more range than the Tesla Model 3,
and the Chevrolet Division of General Motors has a track record of building
large numbers of cars at low cost.

~~~
drcross
I think range anxiety is over-played because 1. people don't drive for long
distances all the much anyway and 2. battery capacity improves 8% year on
year, within 9 years it will have doubled and it will be a moot point.

~~~
dsfyu404ed
But what about when you do want to drive a long distance? Unless you just want
to drive in circles around a major metropolitan area where charging stations
are plentiful it's going to require having a planned route/schedule and
sticking to it. That's a huge decrease in utility compared to a vehicle you
can fuel up anywhere. Unless chargers become close to as common as gas
stations EV range will have to be greater than that of traditional vehicles.

~~~
hilop
Same thing you do when you own a sedan and want to go on a big camping trip or
move to a new apartment. You rent a journey-approppriate car for the rare
special case.

~~~
saiya-jin
you would be surprised how many people do need long distance travel, and not
just once or twice per year. for me and quite a few people I know, till
electric cars can make at least 800km in single push of 130 kmh real traffic,
they are useless as private cars. it will come, but maybe in 5-10 years.

I mean, doing 1500km travel (which i do 1-2x per year) would mean 4 hour
drive, then couple of hours of forced wait, again drive and so on? completely
useless

~~~
patrickk
"Completely useless" is way too strong.

If you _regularly_ drive more than 300km, then yes, ICE vehicles will remain
your only option. But if you are a suburbanite or city-dweller who has a
typical round trip commute of 70 miles or less[1] then in the very near future
a Tesla Model 3 or equivalent will be the economically rational option for you
to purchase.

I think about buying a EV in the same way as I would think about choosing the
number of bedrooms in a hypothetical house purchase: do I overpay for a house
with one extra bedroom, in the rare case I have relatives or friends once or
twice a year, or do I offer to put them up in a nearby fancy hotel for that
rare case? Similarly, do I buy the car that fits my needs for 95% of my day to
day driving, is economical to run, and rent a car when I need the extra range,
or do I overpay day to day for the rare edge case where I need that extra
range?

Then again, plenty of people choose ridiculously oversized SUVs to drive their
kids to school so we shouldn't expect drivers to suddenly become economically
rational in their vehicle choice.

[1] [http://www.statisticbrain.com/commute-
statistics](http://www.statisticbrain.com/commute-statistics)

------
kumarski
I don't think this is likely, solely based on the limitations of galvanic
battery chemistry today.

Energy transitions from wood to coal to natural gas to renewables etc...
usually take decades to switch over.

As well, there's no exponential growth in solar. We may be hitting the S-curve
flat line on battery storage.

We can't keep moving left on the periodic table. Lead Acid ---> Lithium Ion.
Where to move to next?

Lithium Fluoride batteries are scary because of the reactivity...got that
noble gas, ya know?

Zinc ion rumors abound, but those ions are big, really tough. Zinc is a huge
ion and thus you can only stick a few in the electrode.

Any chemists on hackernews or am I forever alone?

~~~
philipkglass
The biggest drawback of batteries today is high costs, not physical
parameters. A BEV with Model S range could be as popular as the Toyota Camry
if it could be profitably sold for the same pre-rebate MSRP as a Camry. Tesla
doesn't need to find a metal lighter than lithium; they just need to bring
lithium ion costs down.

For stationary energy storage energy density is even less important and costs
are even more important. IMO the best way to make stationary energy storage
affordable would be to increase battery cycle life, via chemistry tweaks
and/or charge controller tweaks. You don't have to compete so fiercely on
lowering up-front costs if you're selling to institutional customers and can
demonstrate lowered lifetime costs.

I'm not going to proclaim that lithium ion batteries will certainly win the
storage wars. But I think there's an interesting historical example from
photovoltaics. In 1976 terrestrial PV cells were mostly made out of
crystalline silicon and a lot of researchers were searching for materials that
could lower PV costs either by increasing conversion efficiency or by being
cheaper than high purity silicon. The search never stopped, and maybe some day
silicon will be overthrown. But in 2016 crystalline silicon is still the most
common, most efficient, and least expensive option for making terrestrial PV
cells. Iterative improvements on the incumbent technology kept it ahead of all
the many disruptive alternatives proposed over the decades. Maybe the same
will happen with battery chemistry (either lithium ion or another one that's
already been commercialized, like sodium ion) -- iterative improvements that
keep disruptors forever playing catch-up.

~~~
kumarski
In the end, it is like trying to cut down a tree with a butterknife.

------
powera
No. [EDIT: headline here fixed to not include the words "death spiral"]

The article is a (lousy) summary of a report from Fitch. It has no new
content, and its regurgitation of the report confuses most of the fundamentals
of the energy and credit industries.

~~~
tptacek
This is by itself a very useful kind of HN comment, but just so you know, it
leaves me hungry for a lot more detail. In case having a waiting audience
motives you to write more... well, you've got one.

~~~
fab13n
I haven't access to the Fitch article, and I'm no specialist of the automotive
market at large. I know even much less about oil. However, here are a couple
of guesses about how things are likely to go wrong for car makers.

In a vertical market like cars, you've got many actors, from iron ore mining
to the "going from A to B reliably" service, going through part makers (who
actually make most of the car), car maker (brands), repairmen, dealers, etc.
Very often in those markets, one actor controls a key level, protected by
entry costs, secrets, regulations, exclusive customer relationship, whatever.
By leveraging this stronghold, this actor extracts most of the margins,
leaving just enough to other levels to let them survive. You want all other
levels in your vertical market to be commoditised: Microsoft wants PC hardware
commoditised, Über wants driving to be commoditised (through underpaid drivers
first, unpaid robots ASAP), etc.

It seems that for cars, mastering the engine is the way to control the whole
vertical market. Moreover, ever-more-stringent emission + fuel efficiency
regulations keep it hard to make engines, despite technical progress.
Electrical cars change that, because it's (comparatively) very easy to make an
electrical engine.

Another asset held by carmaker is the brand and consumer relationship, and
this one's probably doomed as well. Cars stay parked for 95%+ of their lives,
the only reason you buy one (and it's your most expensive possession after
your house) is because you want it to be reliably available whenever you want.
Once cars drive themselves, it stops making economical sense to own one: for a
fraction of the price, you'll rather subscribe to a fleet of autonomous cars
which reliably deliver one on your front door 10 minutes after you summoned it
with your smartphone. That not only means fewer cars driving a higher
percentage of time: it makes obsolete the car-makers' genuine expertise in
making individuals want to buy their models. I'd bet that selling hundreds of
thousands of units to Kalanick is significantly tougher than making some
hillbilly lust for a Canyonero.

It looks like mastering level-4 autonomy will be the new way to lock that
vertical market, and current car-makers don't look better positioned than the
Silicon Valley to secure that stronghold. Cue the famous last words by the
then Palm CEO, saying about the iPhone “PC guys are not going to just figure
this out. They’re not going to just walk in”. Yes, in radical changes, it
typically is an incumbent who figures it out.

~~~
losteverything
Quite wonderful reply.

<Very often in those markets, one actor controls a key level, protected by..

Any writings on who these actors in different markets? clothing? retail?
shipping? whatever?

<Once cars drive themselves, it stops making economical sense to own one

Driving is so much fun. Do you ever think they will have laws reducing the
driver-cars? Like HOV but for NDV?

So.. when you get into a house you no longer need a landline 'cause of
cellular phones. Does this mean when you get into a house you no longer need
to own a car? Do you really think this will happen?

Another observation. reporting of deaths.

Now, whenever a passenger plane crashes, it becomes top of search news. "We
Interrupt this broadcast" historical procedures. Same for bad rail accidents.
Yet with automobile accidents, there are over 30k each year on our highways.
Not "interrupt this broadcast" or top of search news. [some, but the weather
chair reactions or extreme pileups]. It is even hard to find news about the
death near your home highway at times.

But, anytime a driverless car is involved in an accident, especially a death,
we can expect them to be top of search results and lead news story. It is new.
It will be years before an accident with a driverless car becomes so routine
it does not make news. Tons of news sites need fodder. A driverless accident
is perfect food for clicks and genuine interest.

<deliver one on your front door 10 minutes after you summoned it with your
smartphone

I thought about this. Okay, I will not trust anybody to be better than me when
I drive in a snow storm. Several months I HAVE to go to work. I really doubt I
will take a driverless car especially because I know how crazy other drivers
are and I know the idiosyncrisies of the trek I take 530 times a year. Thus, I
will have to own a car. It will make economic sense.

~~~
fab13n
> Driving is so much fun.

So is horse-riding, and some people still own personal horses. But most people
don't, and those who do ride for fun, not for transportation. They take their
car to go and ride their horse actually. Because horses are comparatively
impractical.

When autonomous cars will be mainstream enough, there won't be any traffic
jams in autonomous-only lanes (yes of course it will be a thing), contrary to
those allowed to legacy cars. Also, fleet cars won't park, so the pressure to
reclaim parking space in the cities will become enormous, and parking your
personal car will become as hard as feeding your horses while shopping at
Walmart. Human-driven cars will become as impractical compared to fleet cars
as horses are compared to cars today.

> reporting of deaths

It's hard to predict which deaths remain newsworthy, and I don't feel like I
can. However, I suspect that crashes between two autonomous cars will be very
rare, compared to human driven vs. autonomous car crashes. And the primate-
operated vehicle will be blamed, probably rightly. Musk considers he needs
autonomous cars to be 10x safer than legacy ones, in order to overcome this
effect, and expects to reach that level in a couple of years (he wrote that's
when he'll remove the "beta" qualifier on his auto-pilot).

> when I drive in a snow storm.

Tesla's radars see perfectly well in the worse snowstorms, you don't. The car
has reflexes orders of magnitude faster than yours, a direct connection to ABS
sensors, etc. As of today, Tesla cars monitor their human drivers in every
driving conditions, compares it to what the autopilot would have done, and
whenever a discrepancy occurs, it sends a report over GSM to Tesla's
engineering teams. That's how they improve their autopilot. As soon as you
drive one you're teaching every car to drive better than you in pathological
conditions :-)

------
happycube
Amusing that we've gone from talking about Peak Oil Supply to Peak Oil
_Demand_...

~~~
stale2002
OMG, I've been saying this for years!

The left was right about peak oil. Just for the wrong reasons. People will
stop using oil, not because we ran out, but because the alternatives will just
be so much better.

I don't think people really understand how much oil is out there. We've got
more oil in the Colorado shale formations, than Saudia Arabia does! It is
fairly expensive to extract, but its existence means that oil prices will
never 'consistently' stay above 100-120$ a barrel for more than a couple
years. Nightmare 200$/barrel "peak oil" are just never going to happen.

------
spditner
There's an excellent talk by Tony Seba at the Nordic Enegy Summit that goes
into more depth about how batteries and solar are quite possibly going to
reach the tipping point sooner than anyone has been forecasting:
[https://www.youtube.com/watch?v=Kxryv2XrnqM](https://www.youtube.com/watch?v=Kxryv2XrnqM)

~~~
igravious
Excellent talk, thank you. Really puts a lot of things in one place.

Wonder what city councils are going to do to supplement the revenue lost if
and when income from parking spot use shrinks due to a combination of smaller
fleets and individual cars in the fleet spending less time parked up.

Of the 4 exponentially improving technology clusters mentioned: battery
storage, electric vehicles, self-driving hw/sw, solar pv -- I'm trying to
imagine if any one of them might not ramp up within the 5 to 10 year time
scale Tony is talking about. And I guess it would have to be the software[1]
part of the self-driving hardware (sensors + compute) / software combo. And
perhaps lithium[2] ore extraction. I don't know enough about the technologies
of solar pv to hazard a guess. If battery storage happens we definitely get
electric vehicles (along with better laptops, tablets, and phones).

[1] [https://www.udacity.com/course/self-driving-car-engineer-
nan...](https://www.udacity.com/course/self-driving-car-engineer-nanodegree--
nd013)

[2]
[https://en.wikipedia.org/wiki/Lithium#Reserves](https://en.wikipedia.org/wiki/Lithium#Reserves)

------
cm2187
Credit markets can sustain expected / anticipated losses. Car makers all have
low ratings when they are not fresh out of chapter 11. The problem with credit
markets is when there is a big blow in a credit that was deemed to be very
safe. Then it hits portfolio that aren't designed to sustain large loses like
money market funds or smaller banks or people overleveraging their position.
Then you have 2008. But a slowly degrading credit quality to which investors
will have years to adjust shouldn't be a problem.

------
Torkel
I find it strange that articles such as this one states these two things at
the same time:

1\. Battery cost is falling and EVs will be as affordable as their gasoline
counterparts in six years

2\. It will take until 2030-2040 until the demand for oil starts contracting

It seems to me like you get to pick only one of these statements. Once EVs
reach affordability parity with ICE autos my guess is that things will hit the
steep part of an S-curve.

~~~
Gustomaximus
6 years takes us to 2022. That gives 8+ years for people to replace the oil
demand creating things that can go away like cars, ships, heaters, aeroplanes,
generators etc.

And general inertia of change. Think more recently how long people held onto
blackberries after the glass front smartphone took off. Few would now argue
the merits of the keyboard over the full screen (not trying to trigger those
of you left!) but a fair chunk held to the traditional view for many years.
The same will be for the above machines. From this the timeline seems
reasonable for me.

~~~
erikpukinskis
If the changeover relied on consumer purchases to replace the fleet, I would
agree.

But I don't think it does. If (when?) you can hail a self-driving cab for a
lower per-mile fee than the cost of gas+insurance+car payment, Uber (Tesla?)
can (will?) put electrics on the street as fast as they can be financed
(manufactured?).

People will let their vehicles rust if it's cheaper to take a cab. No major
consumer purchases required, just cultural diffusion at the speed of super
bowl ads.

------
tlb
There aren't many precedents for huge global industries that went from AAA-
bondable to rapid obsolescence. There are some that should have, like
cigarettes, but they found ways of hanging on. Or international toll calls,
still a many-billion dollar business. Perhaps oil will be like that: since the
marginal cost is so low, producers will keep it flowing many decades after it
made sense. And like tobacco, perhaps we'll pay oil fields to not produce.

~~~
JoeAltmaier
Hm. Horses. Trains. Newspapers. Radio. VCRs.

~~~
tlb
There weren't huge companies with AAA credit ratings making horses. Railroads
did have bond financing, but the decline has been extremely slow. VCR
companies also made DVD players and other consumer electronics, so no
bankruptcies have resulted. Radio is still pretty big.

Newspapers might be the closest parallel, but they haven't completely crashed
yet and might well bounce back.

~~~
JoeAltmaier
Zenith? Many individual carriage companies - Columbus Buggy Company for
instance. But not world-wide, very local.

------
chx
Um. Good morning? Didn't Germany call for a ban of combustion engines by 2030
just two weeks or so ago? These graphs are wildly optimistic if that happens.

~~~
imtringued
I bet those incubents will incube until they finally get shut down in 2030 by
the government.

------
jbpetersen
I'm really hoping this ends up being called the "Dirty Bubble" and was a
little dismayed that no headline catching names have come up yet.

------
lsc
I've been reading a lot about this, and I've been wondering the best way to
buy a long term 'call' option on oil is... Ideally, I'd buy stock in an
unhedged owner of the right to drill for oil in places where it's only
profitable to drill if the price of oil goes up above where it is now.

I mean, I'm no 'peak oil' person or anything, I just don't trust that we went
so quickly from the idea that we were running out of oil and that it would as
a result become super expensive now to this idea that it won't be worth
pulling oil out of the ground for much longer; I strongly suspect that the
truth is between those two scenarios, and would like to lay some money on that
suspicion.

~~~
asah
Danger! Energy demand and alternative energy supplies also affect price.

~~~
lsc
Oh certainly. I am just saying that right now, the estimated future value of
oil is oscillating wildly, I think, more wildly than I think it ought. I would
like to lay some money on that over, say, a ten year time span. Not enough to
be a huge deal if I am wrong or that I never have to work again if I am right
or anything, but I think it would be an interesting bet.

(Unlike many people, I don't think I am smarter than the market... But I do
think I am less excitable and often have a longer time horizon. And yes, I
know that I am probably just as wrong as the people who think they are smarter
than the market.)

------
dv_dt
When individual jobs are threatened from offshoring, it's just too bad for the
workers and is just considered the regular working of the market. When battery
technology threatens previous investments in old tech, its a "threat" to the
market. Hmmm.

------
marze
If only there was some company poised to capitalize on this shift we could all
invest in...

------
gregpilling
Oil is also used for plastics, fertilizer, and many other goods. Not just used
for fuel.

As the world economy expands, because in 10 years everyone will be on a
smartphone, the demand for plastics and fertilizer and rubber and roads etc.
that demand should expand more than fast enough to cover the fleet conversion
from gas to electric.

200 million vehicles in the USA fleet, and they sell 17 million in a good
year. 12 years to replace the fleet; it is currently about 11 years old on
average.

I think the article is over stating it. There won't be any problem, it will
take decades to adjust anyway.

~~~
sunstone
While this may be true, assets can be repriced in a much shorter time frame.
Approximately over night, once the penny drops.

------
nmstoker
The original Fitch report is available here (needs a login but I believe it's
available to free registered users, ie non-subscribers)
[https://www.fitchratings.com/site/pr/1013282](https://www.fitchratings.com/site/pr/1013282)

------
dimino
On that first chart, so battery count will drop post-2030? That's what the
y-axis is, battery count (is it count? production rate?), but the conclusion
drawn is that oil demand will drop, which feels related to the article, but
wholly unrelated to the chart.

Is the y-axis of that graph actually oil demand?

------
GigabyteCoin
Wow... talk about a first mover advantage...

Best case scenario, according to the graphs in the article, is if "Low Carbon
Policies" come into effect to disrupt the oil industry as quickly as
possible... we will still be consuming 50 million barrels of oil per day in
the year 2060.

------
dboreham
So if you have a stable business toady that appears to make money regardless,
it will continue to do so for decades to come (or whatever the bond maturity
term happens to be).

There's never been a case in the past when that assumption didn't turn out to
be true, of course..

------
dimino
Is this at all related to the recent cries of "bubble!" in the sub-prime auto
loan market that John Oliver did one of his segments on? Or do those folks
just shift to selling electric cars, instead of gas cars?

------
Ganoes47
"on a trajectory to make electric vehicles as affordable as their gasoline
counterparts over the next six years"

So, in 6 years, I can replace my Corolla with a Tesla model 3. Cool!

------
paulajohnson
Looks like our survival as a species depends on a race between our ingenuity
and our ingenuity.

------
djyaz1200
Those companies have a STRONG incentive to avoid disruption and this co2 to
ethanol technology might be helpful in that regard?
[http://energy.gov/articles/scientists-accidentally-turned-
co...](http://energy.gov/articles/scientists-accidentally-turned-co2-ethanol)

~~~
forgetsusername
> _Those companies have a STRONG incentive to avoid disruption_

A less cynical person might says "Those companies" have a strong incentive to
preempt and partake in the disruption. And it is my belief that's the path
most of them will take.

~~~
nine_k
Verily. What you cannot prevent you should lead :)

------
rdl
Solidly in the "good problems to have" category, at least for humanity
overall.

------
fatdog
Battery technology is a lot like bitcoin and gold in that once it is
manufactured, users are not dependent upon a state controlled centralized
network for it. It's revolutionary, and will probably be heavily regulated
given the amount of independence it will provide people.

The big secret in a lot of countries where energy and communications are state
monopolies or semi-private corporations is that they are LOADED with debt that
the govt used as a private slush fund.

If you are looking for "off balance sheet" liabilities in a government, look
at its utilities that are exempt from public records laws. This is where a lot
of the bodies are buried.

If people start dropping off the grid, states will just convert the power bill
to a straight up tax bill, but without the pretense of a service attached to
it. There are already precedents for charging electric vehicle taxes to make
up for the shortfall in fuel taxes they create. Govts say, "well, if they are
using the roads, they should pay for them." except gas taxes go into the slop
bucket of general revenue, and the roads have been paid for through other
taxes. The largest state expense is employee salaries, yet all road
maintenance is done by contractors, so the "roads" thing doesn't really wash.

When Greece was trying to sort out its default, it outsourced tax collection
to its utility companies as part of the bailout.

Efficient power storage will be a game changer, like a redrawing of
international boundaries game changer.

~~~
pastProlog
> Battery technology is a lot like bitcoin and gold in that once it is
> manufactured, users are not dependent upon a state controlled centralized
> network for it.

Gold is just a commodity, it does not have any magical properties. Since gold
is durable, uniform, divisible and portable, it makes a good currency.

~~~
mathgeek
I think the point being made was that governments don't produce gold, and they
have a much harder time controlling it.

------
f137
The logic is backward, actually.

The low risk that any breakthrough in batteries would happen IS the reason for
the vast amount of securities dependent on it.

------
StillBored
Uh, ok, so where is all the power for these electric cars going to come from?
That oil/natural gas/whatever is just going to get burned at some large newly
built plan and transferred using a ton of grid upgrades (all likely paid for
using bonds).

Moreover, the cars aren't going away, instead of buying one with a ICE, its
going to have a battery and some electric motors, the companies producing that
will likely need bonds too. So, without attempting to compute the costs of a
few dozen gigafactories, rare earth mines, etc, the article seems pretty
worthless to me.

Frankly, i've been wondering for the past few years what percentage of a
modern car's production cost is actually the gas engine. Modern engine
complexity seems to have peaked 20 years ago, and declined. Of course safety,
comfort and entertainment systems have exploded in complexity in that same
time period, but those are things people expect out of modern electric cars
too.

~~~
imtringued
>That oil/natural gas/whatever is just going to get burned at some large newly
built plan and transferred using a ton of grid upgrades (all likely paid for
using bonds).

Drivers of electric cars can choose their electricity source. Whether they
want to pay more for green electricity is up to them. If there is demand more
green electricity will be produced. With a ICE there is no choice.

>Frankly, i've been wondering for the past few years what percentage of a
modern car's production cost is actually the gas engine.

I don't care about that. I've already paid 30% of my cars value just for the
gasoline alone. Even if I had to pay 30% more for an electric car then it
would still be worth it because of tax benefits and less maintenance.

