Extremely Low Oil Prices Might impact Bitcoin Mining Industry

[Debonaire217]

Have you ever watched this video on youtube? He stated some arguments concerning the effects of low-cost Oil or Oil prices dump to bitcoin mining. I am somehow convinced when he said that the U.S. has 12,000 barrels of oils per day, and might be an opportunity for cheap power which might be taken advantage of by miners to save electricity bills.

Imagine right now that the rewards for miners have been halved, most of the miners might think of quitting the industry but they learned how to utilized and take advantage of these oil prices, it could turn the table for them to start fresh and keep their mining rigs up and running making the bitcoin network more efficient.

[pooya87]

that seems like a big assumption based on no evidence.

miners don't buy oil and burn that to generate electricity, they buy electricity from electric companies.
how many months since the oil price tanked? 3 or 4 months?
how much electricity cost has lowered? zero!
so we can't claim that miners are paying less for electricity when that dump is not seen in what they are paying at all. besides i don't think the oil price is going to stay this low for that long. it has already been recovering.

[The Cryptovator]

Nah, we can't expect oil price impact on bitcoin mining. I am not sure how many miners use own power generators to generate electricity but most likely they just use it as backup during load-shedding. Governments didn't reduced electricity bills yet as far as I know. So there is very low chances to get advantage of low oil price for miners. Since bitcoin price showing good move lately so I believe miners still in profit stage even there was halved reward. Besides that we are encountering high fees those are goes to miners.

[Wind_FURY]

OP, I believe it won't be anything new. The miners have always traveled around the world as electricity buyers in search of cheap electricity, and providers of cheap electricity are willing to accept with them.

[Coin_trader]

that seems like a big assumption based on no evidence.

miners don't buy oil and burn that to generate electricity, they buy electricity from electric companies.
how many months since the oil price tanked? 3 or 4 months?
how much electricity cost has lowered? zero!
so we can't claim that miners are paying less for electricity when that dump is not seen in what they are paying at all. besides i don't think the oil price is going to stay this low for that long. it has already been recovering.

This is true. In my country, the oil price decrease by whopping 50% but still the electricity rate was still the same. This energy company didn't lower there charge even though the oil they are using to generate electricity was cheaper compared before. They are fooling people that they need the money for maintenence and man power cost due to crisis. So I agree with the statement that oil price has no significant impact on BTC price unless mining company are using oil powered generator for the electricity then its possible.

[figmentofmyass]

miners don't buy oil and burn that to generate electricity, they buy electricity from electric companies.

there are oil-fired power plants that generate and sell electricity. they usually operate at low capacity outside of peak demand seasons because high oil prices made them uneconomical long ago. low enough oil prices could considerably change that, allowing oil-fired plants to undercut competitors. this could draw in miners.

how many months since the oil price tanked? 3 or 4 months?
how much electricity cost has lowered? zero!

his theory is not that there would be uniform electricity price drops. the price would drop in places with gluts of oil and presumably oil-fired power plants that could absorb the supply. that's why he mentions the gulf coast, which has lots of oil-fired power plants and lots of tankers sitting on more oil than they know what to do with. https://www.eia.gov/todayinenergy/detail.php?id=31232

it's sort of a wild theory but not inconceivable.

[Naida_BR]

I don't think that Bitcoin can be impacted by oil prices.
Those two "commodities" do not have something in common and they do not correlate in the market.
If it had to do with electricity prices then yes there would be a serious impact on that.

[Wafilian]

The epidemic coronavirus disrupted free communication, reduced oil consumption, and led to a drop in oil prices due to excess reserves. But then everyone, including the UAE, decided to halve oil production to stem the tide.  The oil price has risen slowly since the decision was made, My opinion is that the price drop for this short period of time will not be very profitable for BTC miners.

[lumeire]

Have you ever watched this video on youtube? He stated some arguments concerning the effects of low-cost Oil or Oil prices dump to bitcoin mining. I am somehow convinced when he said that the U.S. has 12,000 barrels of oils per day, and might be an opportunity for cheap power which might be taken advantage of by miners to save electricity bills.

Imagine right now that the rewards for miners have been halved, most of the miners might think of quitting the industry but they learned how to utilized and take advantage of these oil prices, it could turn the table for them to start fresh and keep their mining rigs up and running making the bitcoin network more efficient.

The oil prices have been on a decline from a long time like more than 3 to 4 months but the electricity prices in the US are still the same, so I don't think miners will be able to take advantage of a low price of oil because they directly can't buy oil and produce electricity, they rely on the government and companies for electricity but they are too greedy and won't lower the electricity prices for general consumers.

[Ucy]

This doesn't really sound like a sustainable way to mine Bitcoin. What happens if the price of oil shoots up? Miners start looking for another cheap energy sources in other to be profitable? I think it's better to miner with clean energy that has long term "stable price".
 By the way, the focus of miners should be to mine with clean renewable energy so they don't lose the argument in the future that Bitcoin is fair for the environment. If they try to make the oil environmental friendly with some sort of technology, that could still increase cost

[avikz]

Have you ever watched this video on youtube? He stated some arguments concerning the effects of low-cost Oil or Oil prices dump to bitcoin mining. I am somehow convinced when he said that the U.S. has 12,000 barrels of oils per day, and might be an opportunity for cheap power which might be taken advantage of by miners to save electricity bills.

Imagine right now that the rewards for miners have been halved, most of the miners might think of quitting the industry but they learned how to utilized and take advantage of these oil prices, it could turn the table for them to start fresh and keep their mining rigs up and running making the bitcoin network more efficient.

To sustain a profitable mining operation, miners need a Stable source of cheap electricity. Oil's availability in cheap price today, does not ensure the same for tomorrow. So no one really would like to start a mining operations based on oil price assumptions. It is only possible with renewable energy like Wind or Solar.

I understand, that the set up cost of renewable energy is very high but that's an one time investment. The biggest benefit of renewable energy is that the stable and cheaper pricing. Oil doesn't guarantee a stable price over a period of time. While bitcoin price is already volatile, working with another volatility may mess up the profitability in both short and long term.

[dothebeats]

A somewhat unusable fact.

Crude oil's prices--basically those that went from the ground and weren't processed yet--were the ones that took a huge beating and not really those that were already used for energy. Power prices basically hasn't really adjust much; it may have rolled back a few times but that was already cut short since power companies are already recouping the loss since most states and countries are gradually opening their economies meaning people can somewhat pay for electric bill the way they used to be (at least that's what their assumption is). Anyway, this does not open the possibility for small and medium-sized farms to mine again, given that the price isn't really going up and the competition remains tougher than ever.

The global oil price will not remain dirt cheap for long, and with that, power prices will also not remain low.

[pakhitheboss]

So, you recommend the miners to use generators that use gasoline to run their mining rigs. What about the pollution generated by those electricity generators? What about the cost of purchasing those generators and why would they shift from conventional model of mining?

I do not think it is possible. It is better to use solar panels to generate electricity than what you recommend.

[20kevin20]

So, you recommend the miners to use generators that use gasoline to run their mining rigs. What about the pollution generated by those electricity generators? What about the cost of purchasing those generators and why would they shift from conventional model of mining?

I do not think it is possible. It is better to use solar panels to generate electricity than what you recommend.

It doesn't make sense for the miners to purchase all the necessary equipment. That's like building a mill to power your own mining farm - in the end, the cost might be higher than running it on electricity. The main idea is that miners could take advantage of electricity providers that work with oil, as their prices could drop in tandem with the oil price.

You'd need hella lot of generators and physical oil to run a mining farm from oil-powered power generators.

[Artemis3]

The only miners who could theoretically take advantages of this, are those owning oil powerplants. They can, for the time being, put that excess capacity to use while it remains profitable to do so. Except in those rare cases, where the miner is also the owner of the powerplant, i doubt anybody else would take advantage of this.

Since oil prices appear to be recovering, i guess even messing with this isn't going to happen, unless its a case where its already done (an existing farm).

In the long run it is renewable that have a future, what with being "free" and all. Yes, there is an initial install cost, but most setups can easily serve for 20 years. Its for long time commitment.

[josephsonand]

It sounds very doubtful. The author operates with too weak arguments.

[Tipstar]

Mining is a large investment. People just don't buy miners when oil prices are cheap and stop mining when they gets higher. Most of the miners maintains a steady flow of electricity throughout the year as stooping the miner is losing the money, specially considering bitcoin mining hardware. They need to make a profit before the new hardware comes into the market.

[stompix]

I'm really amazed he started this with a really fundamental error, genuinely surprised how he could make some mistakes.
Negative contracts don't mean producers will pay you 30$ to show up with a barrel and fill it up at the end of the month, those are contracts in which as a contract buyer or investor you are willing to pay -x to get that oil out of your hands.

So, it's not really like powerplants that use oil get paid to burn it, not do drillers pay you when you take that oil.

Second, oil is an important source of electric energy,
https://www.eia.gov/tools/faqs/faq.php?id=427&t=3
Petroleum (total)   19  0.5%

Plus, you can't start building powerplants just based on the prices from April, with prices over 30$ it doesn't make sense to burn oil, you can burn coal.

There is another interesting fact that also it's curious he hasn't touched.
Oil slipping into negative it's a premiere but..electricity sliding into negative is not it occurs far more frequently and electricity is actually the main thing you look at, nt oil which must be burned to create electric energy.

Which brings us to another interesting fact:
https://www.reuters.com/article/us-usa-electricity-outlook/u-s-electricity-use-to-drop-by-record-amount-in-2020-due-coronavirus-idUSKBN22Q2UK

U.S. electricity consumption will collapse by a record 4.6% in 2020 as businesses shut due to government lockdowns to slow the spread of coronavirus, the U.S. Energy Information Administration (EIA) said in its short-term outlook this week.
EIA projected total U.S. power demand will drop to 3,716 billion kilowatt hours (kWh) in 2020 from 3,896 billion kWh in 2019 before rising to 3,753 billion kWh in 2021.

So we already have excess capacity in electric energy, there is no point of starting to burn oil when you already have it produced and not consumed.

I'm a bit amazed on his take on this one..

[figmentofmyass]

I'm really amazed he started this with a really fundamental error, genuinely surprised how he could make some mistakes.
Negative contracts don't mean producers will pay you 30$ to show up with a barrel and fill it up at the end of the month, those are contracts in which as a contract buyer or investor you are willing to pay -x to get that oil out of your hands.

So, it's not really like powerplants that use oil get paid to burn it, not do drillers pay you when you take that oil.

Second, oil is an important source of electric energy,
https://www.eia.gov/tools/faqs/faq.php?id=427&t=3
Petroleum (total)   19  0.5%

Plus, you can't start building powerplants just based on the prices from April, with prices over 30$ it doesn't make sense to burn oil, you can burn coal.

his theory IMO was based on the idea that oil prices are cratering longer term, not staying above $30 a barrel. he's not saying april contract settlement in and of itself would cause this transformation.

i don't think he's talking about power plants being built is he? existing oil-fired plants from decades past already run way below capacity due to high oil prices, so there is excess capacity that could easily come online if there was a bigger collapse in oil prices. https://www.eia.gov/todayinenergy/detail.php?id=31232

So we already have excess capacity in electric energy, there is no point of starting to burn oil when you already have it produced and not consumed.

there is excess oil already produced too. what matters in the end is what the final cost of electricity is. in theory, at low enough oil costs oil-fired plants can undercut other power producers, although i don't know enough to say what $/barrel cost (or length of time spent at those prices) it would take for his theory to play out.

[stompix]

his theory IMO was based on the idea that oil prices are cratering longer term, not staying above $30 a barrel. he's not saying april contract settlement in and of itself would cause this transformation.
....
in theory, at low enough oil costs oil-fired plants can undercut other power producers, although i don't know enough to say what $/barrel cost (or length of time spent at those prices) it would take for his theory to play out.

He started with negative prices and he published this on the 27th of May, let's assume he is indeed talking about a long term trend..
BUT
For oil to compete as energy generation with coal you need a barrel of oil to be 4 times cheaper than the metric ton of coal, which although spiking lately was usually in the 30-40$ range so you need oil at least at one 10$. You have extra oil to burn, well, you also have a lot of coal and a lot of excess capacity in coal. Just the excess capacity in Scherer and Bowen could power 20% of the network. That's why you use in winter those oil powerplants because the energy gets expensive as an import from Canada decrease, hydro goes down, solar is almost dead but the gas consumption is also dead.

No, it needs too many stats aligned (and Trumps's tariffs to go away) for this to happen