Why I Am A Big Bear On Oil And A Bull On Vanadium

John Lee, CFA profile picture
John Lee, CFA


  • Long-term bearish fundamentals for oil are discussed in detail.
  • Lithium ion batteries are popular now but could be replaced by better alternatives in the future.
  • Vanadium batteries are ideally suited for large, utility grid-scale energy storage and could be the next energy-metal story.

Future predictions of oil prices vary wildly. I am fundamentally long-term bearish oil and consider, in great detail, some key factors that increase oil supply and reduce demand, which many analysts underestimated or overlooked. Then, I will talk about the surging popularity of lithium ion batteries, the technology’s merits, drawbacks, and my future outlook on lithium ion batteries. Finally, I will talk about vanadium batteries and how it could revolutionize the energy storage market, and particular ways to profit from the future use of vanadium battery.

Oil Supply

As depicted in the graph below, world crude oil production has increased 50% since 1985, with unconventional crude oil production accounting for the majority of the crude oil production increase since 2010.

Source: EIA Powered by YCharts.com

Source: Forbes

The increase in shale oil supply in the face of declining oil prices is closely related to the much improved fracking technology. This enhanced technology has cut the breakeven price for key United States shale oil plays by more than half since 2013.

Source: Rystad

As indicated in Forbes, the decrease in the breakeven price is a factor in the significant crude oil production and exploration in the Permian Basin of Texas and New Mexico.

“Today, at around 2 million b/d, the Permian accounts for over 20% of the country’s (USA) crude production and is the second largest oil field in the world, after Saudi Arabia's legendary Ghawar field.

A barrel of oil currently sells for $53-54, which is well above the break-even oil price of $35 or so in the Permian.

This year, expect an average of 345 oil-directed rigs in the Permian in 2017, or a 93% increase over the 2016 average, followed by a 25% increase in 2018 y/y.”

Shale oil production propelled the USA to third largest oil

This article was written by

John Lee, CFA profile picture
John Lee is an entrepreneur with degrees in economics and engineering from Rice University. Under John’s leadership, Prophecy Development Corp (TSX: PCY, OTC: PRPCD, www.prophecydev.com) raised over $100 million and acquired substantial silver mining projects in Bolivia and coal mining projects in Mongolia. ================ John Lee is a portfolio manager at Mau Capital Management. He is a CFA charter holder and has degrees in Economics and Engineering from Rice University. He previously studied under Mr. James Turk, a renowned authority on the gold market, and is specialized in investing in junior gold and resource companies. Mr. Lee's articles are frequently cited at major resource websites and a esteemed speaker at several major resource conferences.

Disclosure: I am/we are long PRPCF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (23)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.