2014 May 16

The Master Resource Report 2014-05-16

Toyota ends battery and drivetrain supply deal with Tesla

Toyota announced this week that it will not be renewing its agreement with Tesla to supply batteries and the drivetrain for its RAV4 electric crossover vehicle. The RAV4 electric has sold poorly since its introduction.

According to a New York Times article “Toyota has increasingly signaled that it sees fuel cells as the most viable zero-emissions technology.” Toyota has previously indicated it plans to market a fuel cell sedan in California next year. The company believes that short comings of batteries can be overcome with fuel cells and the market for zero emission vehicles is still in its infancy.

IEA raises concern about supply in late 2014

In its latest Oil Market Report, the International Energy Agency (IEA) raises concerns about recent production growth not being adequate to match rising market demands. “Crude prices remain elevated and forecast balances call for a significant rise in OPEC production from current levels for the second half of the year,” the IEA said.

Global supplies rose 700 kb/d month-on-month to 92.1 mb/d in April, with roughly half of the increase stemming from OPEC producers. Global supplies were 820 kb/d higher than a year earlier, with non-OPEC annual output growth of 1.8 mb/d more than offsetting an OPEC crude oil decline of 960 kb/d.

Note that the IEA is reporting all liquids which includes biofuels and NGLs. For example the IEA estimate for global crude oil refinery throughput for the second quarter of 2014 is 76.2 million barrels per day. It is important to know what is being included or excluded when agencies like the IEA or EIA report production and consumption data.

IEA forecast from 1982

Here is what the IEA was forecasting 30 years ago.

New York Times: The I.E.A. study predicts that production by the Organization of Petroleum Exporting Countries will stay in the range of 23 million to 29 million barrels a day during the rest of this decade. But output in North America and the North Sea is likely to decline after 1985, it said, and the Soviet bloc will no longer be a net oil exporter, but will become a net importer of 2 million barrels a day by 1990. Oil demand in the developing world and in OPEC itself will grow, the report predicted.

Today Russia is the largest oil producer in the world surpassing Saudi Arabia. OPEC’s current production stands at 29.9 million barrels per day.

The United States will remain the West’s largest coal producer for the rest of the century, producing 65 percent of Western coal in the year 2000 and accounting for 70 percent of the expected growth of coal demand.

They clearly missed the rise of China and the issue of climate change was still on the horizon. What will today’s forecasts look like 30 years from now?


Note: Currently clients and advisors at Ravenna Capital Management do not hold positions in Tesla or Toyota.