Tuesday, April 04, 2017

Consider investing in commodity to diversify

Commodity markets are at a turning point given the economic situation and technological S curse we inhabit. 

Something to look out for is the oil price volatility. The oil price will be revised downward by electric vehicles which will happen around 2020. timing is key but impossible to pinpoint so investments ought to take it into general consideration and plan portfolios for long term gains.

To start an oil crash you don't need to replace all fossil fuel cars with EV but just a small segment of the 1 billion cars in the world. consider the oil crash of the 2014, it was caused by pumping just 2 million extra barrels a day. it was a crash caused by supply so if electric cars displace the 2 mill plus on the demand side it should also cause a crash.

This far is common sense but when will EVs be there Tesla is going from 50 thousand last year to 500 thousands by 2020. lets assume Tesla meets its targets and other manufacturers maintain the current combined market share for EV. each electric vehicle displaces 15 barrel of oil a year and we hit our benchmark target of 2 million barrels of oil displaced a day in 2023. that is the start of the crash and the crisis will follow in the years to come.

The impact of such crisis goes behind the commodity prices and will impact stock and bonds. trillions invested in fossil energy will be lost and trillions will be invested in new energy. stocks of BP, Shell and the likes will plummet and gains will be made in renewable energy stocks such as CVA and ABY.

The estimates are conservative and doesn't take into account expansion by all manufacturers, technology improvements, investment by challengers, quantum leaps and regulatory tax breaks. All this means the future will be here sooner than you might think. 

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