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The big oil price crash is a question that seems to be front and center on the mind of financial markets these past few months, but, not to worry, it’ll come back up, it always does! So goes the reasoning of oil analysts and investors, but what if something other than supply temporarily overriding demand is at work on a longer-term basis, then what?
Sure, American fracking has upped the competitive stakes by producing fossil fuels from tight shale formations that were previously too difficult, too expensive. Thereby, effectively constricting import demand by one of the Middle East’s biggest customers, the United States, whilst adding a whole new source of supply on top of the excesses produced by the sheiks. As follows, supply outstrips demand and prices fall (reference material: trading commodities, 101.)
Notwithstanding, there may be something much more profound at work behind oil’s slippery slope, beyond the supply and demand equation. The “market” in all of its purported wisdom may be recognizing a disruptive future for hydrocarbons, a quasi-carbon-free world. Then, what of oil prices and what of Saudi Arabia, the kingdom built on sand dunes?
A narrow answer to that provocative question is found by following in the footsteps of those who know fossil fuels well. For example, John D. Rockefeller built an enormous fortune on oil, but today his heirs are selling their fossil fuel investments: “The Rockefeller Brothers Fund is joining a coalition of philanthropists pledging to rid themselves of more than $50bn in fossil fuel assets,” Rockefellers to Switch Investments to ‘Clean Energy,’” BBC News, Sept. 22, 2014.
So, how about that $50bn in assets?
According to Stephen Heintz, director of the Rockefeller Brothers Fund: “We are quite convinced that if he [John D. Rockefeller] were alive today, as an astute businessman looking out to the future, he would be moving out of fossil fuels and investing in clean, renewable energy,” Ibid.
Furthermore, and potentially adding considerable fuel to the fire of falling oil prices, as of a week ago, Elon Musk inadvertently stepped into the cascading oil price scenario while holding a conference call with Wall Street analysts following release of earnings for his electric car company, Tesla. During the interview, and “merely in passing,” Mr. Musk announced his intention to start producing a “stationary battery” for powering homes within the next few months. Yes, this year!
Respectively, whether oil futures ticked down the moment Musk dropped that “game changer” is not known, frankly unlikely, but, as far as it goes for long-term investors, concern about oil pricing should be paramount. Musk’s stationary battery concept is the “the game changer of all game changers,” similar to the impact cell phones have/had on landlines, and that game changer happened well within a short decade.
Musk’s stationary battery to store solar energy is categorically disruptive for large portions of America’s traditional industries, for example, the utility industry, and the oil & gas industry. In fact, Musk’s stationary battery is the kind of stuff economic revolutions are built upon, thus, making oil & gas production look more than ever like an old prizefighter beyond his prime.
Not only that, but according to Mr. Musk’s analysis, solar energy combined with stand-alone battery systems will supply power at lower costs than natural gas. Indubitably, that upsets the apple cart for all things labeled fossil fuel, pretty much across the board.
Along those lines, Elon Musk is currently building a gigafactory in Nevada; it’s a $5 billion partnership with Panasonic Corporation to manufacture batteries for cars and for homes. The factory will be primarily powered by wind and solar.
Meanwhile, Tesla will soon hit the market with stand alone battery systems for smart energy consumers, whether mom & pop at home or big commercial enterprises. In fact, the company has already begun installing Tesla batteries on commercial buildings, like Wal-Mart stores, saving Wal-Mart stores 20-30% off energy bills. What responsible business wouldn’t do that?
As well, 500 homes in California are part of a pilot project, using the Tesla battery 10-kilowatt battery packs, when required, to power their homes for up to two days w/o sunlight.
Along those lines, as far back as 2013, the Edison Electric Institute issued a warning to utilities: “One can imagine a day when battery storage technology or micro turbines could allow customers to be electric grid independent,” Josh Dzieza, Why Tesla’s Battery for Your Home Should Terrify Utilities, The Verge, Feb. 13, 2015.
As for fossil fuels, one of the biggest consumers of coal, oil, and gas is the utility industry, powering homes and businesses all across the land with electricity. Just imagine the challenge, the trepidation, the abomination for fossil fuel users, producers, and all those involved in the fossil fuel industry should Mr. Musk’s stand alone batteries become really, really, really popular. It may be reason enough to avoid long-term oil futures.
What, then, happens to the well-oiled, outspoken climate change/global warming denial camp on Capitol Hill?
As for the future, the repercussions of Mr. Musk’s “stand alone battery” are far and wide, including new political maneuvers, maybe a new party, certainly new political faces in Congress, massive losses of campaign contributions abetting fossil fuels, huge campaign war chests with nowhere to go, crumbling fossil fuel infrastructure like the ‘proposed’ XL pipeline, becoming white elephants rusting on the plains, thousands of rail tanker cars setting idle, rusting away, refinery closures, more rusting steel, North Dakota engulfed in a maddening mass of spewing, rusting derelict oil rigs, and chaos throughout the Middle East as kingdoms fail, bereft nomadic masses trudging, wandering across hot sand.
On the other hand, as stated by Sir Nelson M. Lubao, “every negative has a positive side,” the transition from a fossil fuel dependent world to a renewable energy world, while serving as the final nail in the coffin for the 200-year-old smokey industrial revolution, will merge into the current trendsetting technological revolution, bringing in its wake a whole new set of job skills, full employment, massive infrastructure development, on the order of the Marshall Plan rebuild of Europe, and importantly, new politics, a high tech brand of smart politics that favors eco-economics, as emphasized by Apple, Inc., or economics alongside nature rather than the callousness behind today’s neoliberal emphasis on profits, and only profits, which is joined at the hip to today’s old-fashioned energy industry.
Robert Hunziker lives in Los Angeles and can be reached at email@example.com