Tesla The Disruptor Vs. Oil The Corrupter

| About: Tesla Motors (TSLA)


Rising oil prices from Middle East tension can be catalyst for change.

Tesla may be benefiting from oil's price increase evidenced by the rise in share price.

Barriers to widespread adoption for EVs in general can be overcome by creative solutions.

It only takes upheaval in the Middle East between warring religious groups to make us revisit the notion of where our fuel supply comes from and how it impacts different parts of our daily life. We have written in the past here on SA on the impact that Tesla Motors (NASDAQ:TSLA) has made here in Norway. In fact, the Tesla S has become the most sought after car in Stavanger, the capital of the oil industry in Northern Europe with an extensive list of sub-sea oil and gas companies. With some like T.Boone Pickens predicting that oil will go $150-$200 a barrel due to the unrest in Iraq, Syria and Turkey, the time is ripe for all to ponder where the cleanest and most plentiful source of energy is.

Norway's love for Tesla is paradoxical because of the size of their sovereign wealth fund is derived from high oil prices. Norway has very big incentives for EVs and provides very fertile ground for the adoption of innovative electrical vehicles, not just Teslas. Since our last writing, the popularity has only increased. We have polled on an ad hoc basis (not very hard when owners are excited to brag about their vehicle) the drivers of these cars every chance we get and the response is unanimous: we love the car. One recent owner we talked to, an offshore drilling engineer working for Halliburton (NYSE:HAL), said she had heard about the humming sound problems through various articles, but she had yet to hear any fellow Norwegian TSLA owners experience the problem.

We also highlighted in the last article that Norway produces much of its electricity via hydro generation. Their engineers have devised a way of creating high altitude reservoirs by using the rocks and rock dust found in the mountains and thereby minimizing the use of expensive cement. This makes their method to make hydroelectric power extremely cost-effective and environmentally friendly: a good choice for their internal consumption as well as sales of electricity to neighboring countries.

As we approach mid-summer on June 21st and the hours of daylight get longer, the sunlight reminds to look to see how solar makes sense in Norway.

Date Sunrise Sunset Length Change Dawn Dusk Length Change
Today 04:24 22:53 18:29 02:58 00:19* 21:21

The opposite of this long daylight is evident in the winter in Norway:

+6 months 09:27 15:40 6:13 12:16 shorter 08:32 16:34 8:02 13:19 shorter

Solar power generation in Norway may make more economic sense as costs for silicon photovoltaic {PV} chips for solar panels continue to drop. Norway is home base for a low cost manufacturer REC Solar (RECSOL) and they contend on their website that solar does make sense in Norway in certain cases. In the meantime, hydroelectric is renewable, cost efficient energy that Norway can use to power the growing market share of EVs. As we know, TSLA CEO Elon Musk is a big proponent of solar energy evident by his holdings in SolarCity (NASDAQ:SCTY). There is a relationship between REC and SCTY and was recently announced on June 5th. It just seems blatantly ironic that Norway, with all of its oil wealth, is where TSLA is flourishing. In April of this year, a green website announced:

"Tesla breaks 28-year-old monthly sales record in Norway."

Moreover, Musk is the keynote speaker at ONS (Offshore Northern Seas) in late August in Stavanger, Norway. Here is a snippet from the ONS conference site:

"ONS celebrates its 40th anniversary in 2014, under the theme Changes. Elon Musk has shown the world that he can create changes with his technology and business sense. Since he is involved in environmental projects such as electric cars and solar energy, he is the perfect keynote speaker," says Leif Johan Sevland, President and CEO of ONS.

ONS is a foundation that is devoted to the offshore oil drilling industry. It seems that they decided to invite the fox "Elon Musk" into their hen-house. When we see what oil can do to countries in terms of corruption such as the corruption fiasco Norway's Statoil (NYSE:STO) is still addressing and geopolitical upheaval like we are seeing again in Iraq, we need to ask if using clean electricity for transportation is a game-changer whose time has finally come. This is a topic that is always controversial and will only escalate in its importance over time especially as rising prices of oil are reflecting geopolitical turmoil. So far former Saudi oil minister Sheik Yamani's prediction from an article in June 2000 has not materialized. Here is an excerpt from the Telegraph article:

He says: "I have no illusion - I am positive there will be some time in the future a crash in the price of oil. I can tell you with a degree of confidence that after five years there will be a sharp drop in the price of oil."

Fuel-cell motor technology - which can produce electricity by combining hydrogen from a variety of fuels with oxygen from the air - will have a dramatic impact on the oil market, he predicts. "This is coming before the end of the decade and will cut gasoline consumption by almost 100%. Imagine a country like the United States, the largest consuming nation, where more than 50% of their consumption is gasoline. If you eliminate that, what will happen?" Saudi Arabia, he says, "will have serious economic difficulties".

While his timing has been off, his wisdom seems sound. In 2003, an Economist article quoted him as saying:

"THE Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil."

If Elon Musk is the man who can change the "tail wagging the dog" dominance of the oil industry over world politics, he needs to overcome some hurdles we will highlight in our conclusion. But first we would like to show how popular his cars are in Stavanger Norway with this video clip:

Several points from the video:

1. The use of Tesla S as a cab shows the economics of ownership and operation in Norway are compelling.

2. The modern building in the background of the rear shot of the Tesla S is the Norwegian Petroleum Museum located in Stavanger. It seems Tesla owners are spending time at the oil museum because they have seen the future.

3. The Norwegian postal service uses small EVs for local delivery of mail.

4. Emirates airlines is promoting Dubai flights on the very popular public transportation shelter structures. Tesla started delivering the S model to Dubai in December 2013.

As the world now searches for ways of reducing the greenhouse gas climate change problem coupled with the stranglehold that oil has on the transportation industry, Tesla seems positioned to be the poster-child for change to make renewable electricity the alternative to oil. But the main issues Tesla and Musk are facing according to a recent Economist article titled "Assault On Battery" are the limited supply of batteries and the widespread availability of charging stations for EVs. The first is being addressed by the "gigafactory" project which TSLA claims will give ample supply of lithium ion batteries and reduce their costs by 30%. The lack of a vast network of charging stations leading to "range anxiety" seems to be the toughest one to address, even though the large battery count in the Tesla S provides the best driving range in the world of EVs. A recent development which I have been watching popped up on my watch filter over the weekend. The name of the venture is "SunTrux" and their website has a picture of the technology that was described to us under confidentiality here in Norway while they were seeking investors. The picture tells a limited amount about the mobile charging station project but it does provide evidence to see that there are creative minds at work on the "range anxiety" issue. In the meantime, the ugliness of the Middle East situation may yield at least one dividend: Sheik Yamani's prediction coming true.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.