Newport Exploration Ltd V.NWX

TIS Schizophrenia ? Not so much - balanced information.

[Ahkenahmed2]

So today's TIS Oil take would appear to stand in contrast to the one I posted a couple days ago.

However, this side is just another view - an educated one albeit as well, in the context of commodities,  of which oil became a few years ago,  (vs. the stabe staple that everyone used and was not financialized back then like it is now), and that of solar energy,  from the same group.  

GLTA

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COMMODITIES
Thompson Reuters/Core Commodity CRB Commodity Index Courtesy of Bloomberg LP

(sorry no chart)

The geopolitical importance of crude oil is still large, but it is falling away quickly. Its new price level of around $50/barrel has radically altered the stabilities within Russia, South America, and much of the Middle East. As a result, the power dynamics between economic blocs has dramatically changed. Whether or not this is a new, long-term price level or a short-term blip is uncertain, but what we do know is that alternatives like solar are catching up quickly.

For decades, governments around the world have paid lip service to renewable energy. Politically, it plays well with the voters. With a few token programs and some well-advertised subsidies, an elected official can look like they’re making a big effort. In reality, they are changing very little. We’ve found that more often than not large capital infrastructure shifts aren’t initiated solely by desire, but instead by necessity. Saudi Arabia, one of the sunniest places on Earth, has 0.1% the solar capacity of Germany. The reason it’s so low is simply that they’ve always had plenty of oil, and the income derived from this source has always been more than they needed to thrive.

Saudi Arabia’s Oil Minister, Ali al-Naimi says he would like his country to export more electricity (generated through solar) than oil. We believe his statements are reflecting what the chart above shows, that his country needs a new source of revenue…badly. It would appear he doesn’t think the oil market is going to recover in any meaningful way going forward.

The price of solar is coming down dramatically. The National Renewable Energy Laboratory just came out with their solar cost report for Q1, 2016. Their data shows that costs were down yoy by 6%, 4%, and 20% in residential, commercial, and utility-scale sectors, respectively.

Prices are now getting down to the levels where consumers may be looking to solar as an investment. With little yield in savings accounts, CDs, or bond investments, homeowners are finding that an investment in solar for their home may be a solution. While it may not payback 100% for ten or more years, it’s a very good return compared to the interest rate they are currently earning on that money sitting in the bank. Cutting their utility bills, increasing their property value, all the while having an opportunity to sell electricity back to the grid is a very good risk-adjusted bet.

The next ten years will not be a good time to own utility companies which do not have solar operations. Even with the small amount of solar production that is currently entering the market, electric utilities are already finding the need to raise pricing to remaining customers as households go “off the grid.” This trend is only beginning, and the pain to electric utilities will continue to grow.

While solar energy capacity is expanding quickly, we are only in the very beginning stages. In the U.S., less than 1% of total power production comes from solar. In Saudi Arabia, their existing solar production capacity is only 50 MW. In China, solar capacity has risen from virtually zero in 2005, to 33 gigawatts now.

However, their wind capacity is well above that at 101 gigawatts (more than total power capacity in South Korea). War 100 Village Center Drive, Suite 260 | North Oaks, Minnesota 55127 | USA Phone: [phone] | Toll Free: 866.527.8698 | Fax: [phone] | Email: [e-mail] | www.tisgroup.net. 3 COMMODITIES U.S. Solar Installed Capacity MW (1980-2015) Courtesy of Bloomberg LP

Hillary Clinton recently suggested that under her administration she would help build half a billion solar panels by 2020 in the U.S. With only 1.1 million household currently with solar installed, this is a big claim. Solar panels would have to be installed on homes, businesses, cars, and virtually all surfaces of all vehicles and buildings in the country.

With the geopolitical risk-adjusted cost of crude oil skyrocketing due to war, military costs, and bad foreign relations governments are moving away from oil fast. The biggest winners in adjusting for crude’s true cost, including all risk factors, will be solar and other renewables.

Sources:
Bloomberg Data Buckley, Tim. “Cost-competitive solar is coming soon to a grid new you.” CleanTechnica.com 22 September 2016
Casey, Tina. “The cost of half a billion solar panels keeps going down, down, down.” CleanTechnica.com 29 September 2016.
Frangoul, Anmar. “Oil price won’t influence transition to clean energy.” CNBC.com 12 October 2016