Oil futures surged on Wednesday after Russia indicated there was a possibility of co-operation with OPEC, fanning hopes for a deal to reduce a global oversupply that sent prices to the lowest levels in over a dozen years last week.
A statement from Russia's energy ministry left the door open to talks with OPEC, moments after the head of Russia's pipeline monopoly said officials have decided they should talk to Saudi Arabia and other OPEC members about output cuts.
The top non-OPEC producer, Russia has in the past been unwilling to cut oil output, as it battles for market share with OPEC output leader Saudi Arabia.
"I remain sceptical, at the end of the day, about that happening as the oil producers are looking at the other guy to cut production while maintaining their own levels," Andrew Lipow of Lipow Oil Associates said.
"I think the geopolitical factors in the Middle East are playing a bigger part in the actual oil production than the statements from energy ministers who'd like to see higher prices."
Hints of a possible deal between OPEC members and rival producers had already helped oil rally 4 percent on Tuesday.
Losses From Generation To Distribution
This is a table of heat rates for electricity generation. To express the efficiency of a generator or power plant as a percentage, we must divide the equivalent Btu content of a kWh of electricity (which is 3,412 Btu) by the heat rate. The average heat rate for all types of turbines, if you average them together, is about 10,134. This is a rough calculation and does not scale as dispersed.
Efficiency = [(3,412)/(10,134)]*100 = 33.7%
This means that 66.3% of the energy in the raw materials themselves are lost due to heat. Think about that! 1,000 kWh worth of fuel dumped into a generator will leave you with 337 kWh of electricity on average!
Transmission and Distribution Losses
Electricity needs to make it from the generator to your home. As an electrical engineer who works for an electrical contractor, I can briefly speak to how it works.
GENERATOR -> HIGH VOLTAGE TRANSMISSION LINES -> SUBSTATION (steps down voltage for distribution -> DISTRIBUTION LINES -> HOME
The EIA estimates that approximately 6% of all electricity is lost - 2% for transmission and 4% for distribution - from the generator to your meter. This is due to the real-world inefficiencies of the infrastructure and can vary wildly from state-to-state. Older infrastructure, of course, will likely perform worse. Please note these are US figures - we have some of the most efficient electricity transmission and distribution infrastructure in the world thanks to our rigorous standards - countries like India are estimated to incur losses of up to 30% in transmission and distribution (significant amounts are from theft), so EV's will perform remarkably worse in poorer countries, further lessening their efficiency.
dding It All Up
If you've made it this far, we need to calculate the real energy cost of an EV like the Tesla Model S 70, factoring in losses in generation, transmission, distribution and charging.
Generation Efficiency: 33.7%
Transmission/Distribution Efficiency: 94%
Charging Efficiency: 90%
[[(70)/(0.337)]/(0.94)]/(0.90) = 245.53 kWh
Because electricity is such an inefficient utility, it actually takes more like245.53 to charge a 70 kWh EV battery. This drops the real efficiency of a Tesla Model S 70 to 0.977 miles/kWh.
According to the EPA, one gallon of gasoline has an energy equivalent of 33.7 kWh. If a Tesla Model S 70 goes 240 miles on 245.53 kWh of electricity, then we can say a Tesla Model S 70 goes 240 miles on 7.29 gallons of gasoline. In other words, the Tesla Model S 70 gets an equivalent of 32.94 mpg. That is only 58.8% as efficient as a 2016 Toyota Prius Eco for nearly three times the price. (fueleconomy.gov estimates a 2016 Toyota Prius ECO gets a combined fuel rating of 56 mpg.) Depending on which state you live in, a Toyota Prius could get even better mileage by comparison if your transmission and distribution networks see above average losses, or if your state gets more energy from coal than natural gas, which is less efficient in the generation.
If it feels as if the stock market and oil futures are moving in lockstep these days it’s because, to a large extent, they are.
As oil futures plunged in the first two weeks of the new year to 12-year lows, U.S. equities put in the worst-ever start to a new calendar year.
The Tuesday price action was no exception. Oil futures US:CLG6 CLH6, +3.07% surged overnight, lifting global equities and sending U.S. stock-index futures sharply higher. As those oil gains started to fade, stocks also lost altitude. As oil turned lower, U.S. equities soon followed suit, giving up gains to trade in negative territory.
To be a little more precise, Leo Chen, quantitative analyst at Cumberland Advisors, noted that the correlation became very tight after oil fell below $40 a barrel in December. Since then, the contemporaneous correlation between Brent futuresLCOH6, +3.70% and the S&P 500 SPX, +1.19% is “unbelievably high” at 91.39% (see chart below), Chen said, in a note.
That’s pretty close to lockstep, and on par with the correlation between U.S. gross domestic product and the S&P 500, Chen wrote.
Such a close correlation isn’t the norm. In fact, over a five-year period, the correlation was negative 71.8%—meaning stocks and oil tended to move in opposite directions (see chart below), Chen said. And over the last 20 years, the correlation between the two assets, while positive, is only 25%, he said, citing Barclays data.
Investors sold equities in Europe and Asia and favored traditional havens such as the yen, gold and U.S. Treasurys after the Shanghai Composite plummeted 6.4%.
“People are scared to death about China,” said John Manley, chief equity strategist forWells Fargo Funds Management.
LONDON (ShareCast) - (ShareCast News) - Crude oil futures weakened in afternoon trading following remarks from Saudi Aramco chairman Khalid al-Fatih that his country would maintain its investment plans. Saudi Arabia, the world´s main producer of oil could sustain low prices for "a long, long time," al-Fatih told a conference in Riyadh, Bloomberg reported.
Earlier in the day, the Secretary General of the Organisation for the Petroleum Exporting Countries, Abdalla El-Badri, had called on producers from outside the group to assist in braking the glut of oil around the world.
Figures showing a 5.6% drop in Chinese diesel use in December and gasoline use at its lowest in two years were seen by some as adding to Monday´s decline in prices.
As of 18:48GMT front month Brent crude futures were off by 4.1% to $30.92 per barrel on the ICE.
Glencore Plc is said to be storing oil on ships off the coast of Singapore and Malaysia as a market structure known as contango allows traders to benefit from holding on to supplies for sale later.
The commodities trader has at least 4 very large crude carriers, each of which can hold about 2 million barrels, floating at sea off the nations’ coast in Southeast Asia, people with knowledge of the matter said, asking not to be identified because the information is confidential. When a market is in contango, prices for supplies today are lower than those in future months, allowing traders with access to stored crude to potentially lock in a profit.
The chances of a deal between Russia and OPEC are viewed as very slim, despite an intraday spike Thursday in crude prices on talk of a proposed production agreement.
"There's nothing new. It's another part of a stream of news that comes out of Russia and there's no indication that the Saudis have any desire to do anything," said Edward Morse, global head of commodities research at Citigroup.
News services reported that OPEC and producers from outside the cartel would meet to discuss production cuts. There was also a report that Russian Energy Minister Alexander Novak said Saudi Arabia had proposed each country cut oil production by 5 percent to support prices.
Read MoreWhy oil glut not going away soon
Dow Jones later quoted a senior Gulf OPEC official as saying that the Saudis did not ask Russia to cut output by 5 percent. The official also said the proposal was an old suggestion from Algeria and Venezuela.
"I really don't think that has any legs. I don't expect we will see any talks coming from these, and the other reason I think the Saudis would not really pursue this is because the real target of the Saudis is the U.S. shale producers," said Chris Weafer, senior partner at Macro-Advisory in Moscow. "Unless they are also part of an agreement, I can't see Russia or Saudi cutting their own production to help the shale industry."