 I'm here on ThinkTech in Honolulu, and I'm joining the show by remote to show his energy in America. And we're talking with Lu Pugliarisi in Washington. He's the president of EatPrank, which is the energy policy research foundation in Washington. Thank you so much again for joining us, Lu. It's always nice to talk to you. That's great to be here, Jay. Yeah, we talked a number of times about the effect of coronavirus on the economy and thus on the oil and gas markets. And it is getting worse. And today is a kind of a benchmark day. Today we found that it's airborne, not only airborne, but you don't have to have any symptoms. This may explain why it's so fantastically contagious. You could go through the whole process and the disease, not even know it. And in fact, a whole number of people, while that happens. Furthermore, I just read a minute ago, here's a new one for you. It only takes one virus particle, both a variant, one virus particle to infect you. One microscopic particle will do the job. And this begins with the power of this virus. We're just learning about it, and so it's likely to infect the whole world. So the US has its problems today. But before you know it, they'll be everywhere in all the continents. And if we don't watch out, they'll come back on us even after we flatten the curve. So my great concern is this is going to be a long-term thing. Now, you can disagree with me, but you won't have much luck in persuading me about that. No, I think it's a big problem. It's a formidable problem. I do think I was, I thought very interesting. If you get a chance to watch the interview of the chief Korean doctor, who managed very successfully the South Korean program to virtually eliminate new cases in South Korea. And during the interview, he said they had, look at the whole distribution of deaths. They had one death of a 40-year-old and one death of a 30-year-old, and no death still on 30. So I do think this issue of cold morbidity is a big deal. I think we have a huge measurement problem, not just to discover who has it and doesn't, but also understanding what people are actually dying of. Is someone dying with coronavirus? Is someone dying because of coronavirus? And there is no consistency in how this data is recorded worldwide. So I think we have that problem. Actually, I think the issue of reinfection, it's possible. I guess it's possible. But I would suggest that the available scientific research points to that being a relatively low probability. And the cases of reinfection might really be an initial measurement error. But I think we have to keep that in mind. But the global data from CDC and a lot of folks suggest that 80% of the people who get the disease will not be hospitalized. And if we can do something to drop that number of hospitalizations, say from 20 to 15 or 10, through ways to boost folks' immunities and things until we get a good vaccine, that could go a long way. But I do think we don't really have a good story why the death rate is varying so much. Or that has to be the health care capacity. But there are other issues out there. I think one of the interesting phenomenon on that point is the experience in Louisiana. In Louisiana, they elected to have the Mardi Gras. And it wasn't two weeks after that. And the infection rate went way, way up. The Mardi Gras, of course, everybody is close together. Yeah, that probably was a bad idea. Yeah. So I mean, it's got a lot to do with how many crowds you're with and how much you are to people and their breathing on you. But I think there's a lot of factors that go into that. I mean, such as the airborne issue, such as the fact that it doesn't take repeated contact. Only one contact is necessary. It doesn't take a whole lot of particles to affect you. Only one particle is necessary. So we don't really understand just exactly what makes it so contagious. The fact is that it's very contagious. And it's going to continue to be very contagious. And New York may be a place where everybody's brushing shoulders and rubbing shoulders. And they've had a lot of personal contact. They may be like Louisiana. That's why New York is a hotspot. It could be that people in New York don't like to follow the rules, too. And for a week or two, they weren't. And then you have the result. But all in all, I think the US is in much worse shape than Korea was. Korea handled it very carefully with great care and concern. And better than we did. We sort of blew it there for the first two, three, four weeks. Korea did not do that. They saw what happened in China. And their concern was translated into very diligent effort. And they succeeded. So I have two points on that. One is I think CDC did blow the testing. They wanted to have their own tests. They were worried about them. They have an accurate sensitivity. And they should have let the private labs just run with the tests right away. The testing was important. I also think there seems to be something to this dosage level. So by the way, you can get a cold from a single virus. It does seem to be more contagious than influenza and the common cold. But it's not unusual for a single virus to do this. But, you know, let's. And tomorrow, actually, Appbrink's newsletter will go out with links to all our recent publications. And in that newsletter, Larry Goldstein, the previous president of Appbrink and myself, have an unusual thing for us. We're going to give a commentary on this. And our commentary is that we're both kind of plenty long in the tooth. Larry himself has a very impaired immune system. But we think for the sake of the country, we need to have a plan on how we're going to restart the economy. We need to give the American people an idea of how we're going to get what the endgame looks like. And I'm pretty open to a lot of different strategies for that. But I don't think we can just keep saying, well, just hang on for a few more weeks. We have to have a plan. Oh, I certainly totally agree with it. We've got to have a plan. And the first part of the plan is to stop losing people. I mean, losing them to the disease and to be killed by the disease. And the big way to do that, let me say, and I'd like again to make you president, because I think you do a really good job, what we need is testing that we talk about a 15-minute test. If we knew what the problem was of these people who spread or asymptomatic spreaders, if we can identify who those people are, we can isolate them. We're not doing that because we don't think they have the disease. But if we had testing, we would know who they were. We could do a much better job. My son is operating out of Park City, Utah, and got the coronavirus. Oh, no. Actually, for a few days, he had a rough go, but he was OK. He stayed home. It took him forever to get a test. It took him forever to get a test. He went and got a regular test, and they couldn't get a flu test. So I had these symptoms. And eventually, he got tested, and then he was contacted by a public health official. I mean, he's perfectly fine now, because he's like 26 now. It didn't really take him down that. I mean, he had a rough go. He had a fever. He was pretty sick, but he's fine now. So what I'd like to talk about a little bit today, and I'm going to, is what's happening to the world, oil market or energy markets generally. And then I'm going to make a few comments about what's going in in China, because I have some new data that just came in, some new reports. And some of that is pretty hopeful if it's active. You know, we're always worried about Chinese data, but we'll make a few comments on that. So the first thing I'd like to do is let's look at the first picture here, which so this is what's called the Benchmark Standard & Poor's, or global plant food prices. But these are prices, what we call for market cruise, right? Western tech, West WGIs, West Texas Intermediate, Dated Branch is really a crude oil that's traded on the London market and the European markets, but they trade worldwide. But these are the prices for the so-called benchmark groups. But today, Western Canadians select, because it's a long way from these tradeable markets, was at $7 a barrel. Mixes of Mexican crude are at $10 a barrel. This is a colossal drop in the value of crude oil. And if you think about crude oil and products, there was about $4 trillion a year, like a direct value. And so we're talking about taking the value from $4 trillion to $1 trillion worldwide, at least on an annualized basis. I don't think we're going to stay here the whole year. And that's a massive transfer from producers to consumers. And that might be kind of a hopeful sign if consumers could use these fuels. But as you know, they're having a hard time using the fuels because of the lockdown. So why don't we go and... So what you have is a double whammy. The cost of a gallon of oil, a gallon of gas, the pump must be really low now, I mean, theoretically. But also, nobody's driving. So oil companies are... How many times can you drive around the block? You're driving. So you have a lot of what we call inelasticity. Now if you look at the next picture here, this is from my old colleague and friend who has been on the phone with industry, talking to seeing industry and country analyses and talking to traders and thermal operators. And he's looking at what is the estimate decline in world demand for petroleum products month by month by the end of April. So if you look at the EIA data for January, February, March, it doesn't look that bad. But as Larry shows in this data, world demand, you figure about world consumption, I guess around 95 to 100 million barrels a day, right? According to Larry's data, which I think is spot on, world demand for petroleum, all products, jet fuel, gasoline, distillate, and f-ing a lot of petrochemical markets is going to drop by over 25% in April, by the end of April. This is, we have no precedent for this, but I don't care if you look at the history of the modern oil market, going back to the Arab oil embargo, there is nothing, nothing that looks like this. And so this is going to, you know, we're already at some, I think, why did petroleum declare bankruptcy today? A lot of the independent producers are going to be in big, big trouble in the next few months. So how does that actually trickle out there? So, okay, if I'm an oil producer or a distributor, and I have no business or I'm under water in terms of income and expense, you know, then I stopped doing business. I have to stop doing business and maybe I go bankrupt. And that in turn affects the supply, the supply, you know, the supply line. So even though right now I'm going to be paying less for cheap oil, as we go forward, it won't be so much oil. And that may not be so easily reversible later. How do you think about those things? That's a good question. I think there's two parts to this, you know, it depends how long this lasts. I think if we end up, and what the new settled price is, clearly, and one of the things I want to point out, I'm just decline in prices, which we'll talk about, the price of oil in that first chart, you can see it's dropping like 60 to 20. That's probably a lot less than other places. And a lot of folks say, well, you know, this is the Russian Saudi price war. But our own estimates suggest that that's a $40 drop. Yeah, you can fix the Russian Saudi price war. That gives you $6. This is the manned destruction on a global scale because the world economy is grinding to a halt. Okay. And that is what is so scary to me about this. The Russians, you know, we would be off a few, the Russians in the Saudi, they could take five, maybe eight bucks off the price oil. They cannot take 40 bucks off the price oil. So there's a lot of talk in Washington about, well, the president, you call the Russians, we should pro-weight our production and get the markets to stabilize. No, that's not going to fix it. We have to restart the world economy. It brings stability in this market. Okay. Now, what about restarting the oil industry? And it seems to me that you can't restart the world economy without restarting all the pieces on it. And this is an essential piece. So if I say to you, Mr. President, that tomorrow we have to build the world economy back again, where is building oil and gas fit? I don't think that's a huge problem because we have massive inventory. So if there was a hopeful sign out there, these supplies can come pouring out of these inventory. In fact, I spoke to some refiners yesterday. They have vast stock, jet fuel. They were trying to get an exemption to the Jones Act, this act that requires use only American bankers so they can move supplies around different parts of the continental US by boat. And so we have a huge overhang of different products. And the Environmental Protection Agency, we switch, we have different fuels we use in winter and summer. And I think the government has gone ahead and provided a lot of exemptions to provide a little more flexibility into the market. So how do you see this going? I mean, again, how does the, you know, the resurrection of the oil and gas industry play in the resurrection of the economy in general? Should it be pumped up in advance? Should the government step in and try to raise it up? Or should it be an organic? It was going to be organic. You may be able to justify some intervention by the Treasury Department or the Fed to provide bridge loans and things. And completely against an oil import fee or adding more tariffs or regulatory overburden, I think you should continue with the regulatory reform effort. You should have the capital markets operating as fluidly as possible as we start to come out of this. We are gonna have to do a lot of confidence building to get people back in airplane, to be able to travel back to Hawaii. And I do think we need to think about, I do think we have a younger population, which is, yeah, of course, susceptible to this virus, but much less, facing much less fatality risk than the older population. I think there are things we should do whether we should have a plan for that, okay? Because the costs, we cannot do this. And I think this is both sides of the aisle. Even Governor Cuomo said, look, it's not sustainable, right? I am sure in Hawaii, there must be somebody saying, this is not sustainable. We have no tourists coming to Hawaii. But if you do it for a month, it's gonna be painful. You can't do it for six months. Yeah. So what about a utility? What about a utility that runs on oil, which is what we have here in Longstreet Park? Is it embarrassing? This is a good one, isn't it? Power front. Well, yeah, should I buy futures in oil? Should I buy lots of reserve in oil so I can keep it coming at $10 a barrel? I don't think, I mean, if you're an investor, you should buy it. I hope it'll go up to $40 a barrel, okay? Thank you, Luke. I'm making a note of that. But I think actually, let me just say one of the things that you read to press and read the kind of all the blogs and people we talk to, there's a lot of people out there and this will be in our newsletter tomorrow, say, well, this is the end of the petroleum era. It's indication of that getting rid of fracking is not so bad and that we now can rebuild the world economy on renewable fuels only. But guess what? When we come out of this, it's going to be obvious that petroleum is plenable and it's pretty cheap. And one of the big losers of this potentially could be the grand design to transition the world economy through these fuels of the future. I suspect this is going to be a very hard road for electric vehicles and for more exotic renewable programs, particularly outside the utility sector. And in Hawaii even, your baseload power prices are going to fall substantially, substantially. Your gasoline price is going to fall substantially. No, good, good for that. But let me ask you the long term thing you're describing is that yes, we will ultimately have a renaissance. We'll find our economy again and hopefully the global economy will recover and it might be different. You and I can have, we'll have, we will have discussions about how it will be different around energy especially. But let me ask you, if it recovers and we get back to normal again or at least a semblance of normal, is that saying also that the price of a barrel of oil will go back to where it was? I believe the equilibrium price for oil is not going to be in the $50 to $60 range but probably in the $40 to $50 range or maybe the $40 range. And that may seem like a small amount but actually it's a big deal. And I think it's the prices stay at 40 or below. The US oil production can recover. I don't think it will grow substantially but will still be a major oil producer. How about gas? We've been talking about oil for the last few minutes but gas, I mean you follow gas so closely and you taught me a lot about gas. You taught me the future in many countries and many places in the world will be LNG, natural gas. And so where is natural gas going to come out on this? I think natural gas will remain well priced. However, I think we're going to see substantial reduction in this sort of what we call free gas, associated gas, the gas that accompanies the production of the liquid crude oil. And so you're going to see the dry gas producers do a little better. We're working on a paper on this. Michael Lynch and Max Pizzerio are working on a paper on what this means for the price of gas and for the supply of gas. And I have kind of an open mind on that. I'm looking forward because we are proceeding with the fourth year of our joint US demand project on the future of Asian LNG. Yeah, what about all the money that was going to go into building infrastructure for gas? You know, the ships, the pipelines, what have your millions going to go in? And I'm really wondering, and you must be close to this. Is that going to continue or is that stopped? No, it will continue. LNG is a long time play. It may slow down a bit in certain areas. I think the interesting question is right now, major growth is China. I'm interesting enough, if you are to believe the data out of China, and we've got a lot of data that came in today. It seems to be the first world economy entering the post COVID-19 era. And the numbers look pretty good for what they're worth, because you're always worried about Chinese data, whether it's how real it is. But the producer's manufacturer's index, a lot of the numbers on energy demands seem to be picking up in China very quickly now. And I think the Chinese are likely to use this as an opportunity to increase their storage of natural gas and strategic stocks of petroleum. So that's kind of a good news bad news for the world oil market. You know, one factor that has popped up, and it popped up most recently yesterday, was in connection with the workers who are working on essential service type industries. You know, some workers in this country are not working because they're not essential services, and they've either lost their jobs or been sent home, or they prefer to go home. But other workers in essential industries, like healthcare is one, but so is Amazon. Amazon, I would treat it as an essential industry, because that's who we get all our stuff from these days. That's the reality of it. And now they're having issues about the safety of their assembly line staff. I guess it's close proximity, a lot of people involved, and they're afraid that people will catch the virus. And they don't have enough protection and masks and other protection equipment. So I'm really asking a long-winded question about oil and gas. So oil and gas also has a lot of labor attached to it. A lot of people are involved in organizing it and drilling and processing and shipping and what have you. Certainly a lot is automated, but there's still a lot of people involved. Has that affected the oil and gas industry yet? Do you want to affect it in the future? I don't think so. I think actually we will eventually get a vaccine. We will eventually develop a herd community to this. I'm actually very optimistic. I don't really believe in apocalyptic forecast. They've never been right, and I don't think they're gonna be right this time. This is not to suggest this isn't a hard road for a lot of people. I think that all these talking heads on, I thought my suggestion, by the way, for all the network cable shows, that they should fire a third of the staff. And then we'll have a meaningful discussion about when we restart the economy. Because if we have our people talking about all, you know, giving their opinions where they all have a paycheck, I don't think that's a meaningful discussion. I think the executives should fire at least a third of the staff and then ask them to talk about what we do next. Well, you know, I know they put you and me in a room. We wouldn't need anyone else. We would figure it out. Question is how we would implement this plan. To go back to your first comment, it's all about a plan. It's all about a rational plan and good messaging. And we have to accept some risks. Frankly, the risks among the younger population are not that hard, okay? The fatality risk is very low for them. It's... But they're fully capable of getting it and they're fully capable of getting very sick and going down the same road as the seniors go. And many of the fatalities have been under 40. I understand that, but that's kind of anecdotal. The global data suggests that 80% of the individuals who get the coronavirus do not require hospitalization. 80% and 20% are completely asymptomatic. Complete, they don't even know they have it. Well, and that's all true. And that was, I don't know if that was true in Spanish too, but you're not talking about the 20% or the 10%, that's a lot of people that would die. I mean, we had a lot of discussion yesterday with the president in the Rose Garden about, okay, well, it's not zero. It's maybe 100,000 to 240,000. Other estimates are much higher. And of course, the president has in the past many times underestimated the risk of this disease. So, the answer is somewhere in the middle. That's a lot of people. You know, what's a life worth in terms of, you know, you've often talked about squeezing. Was it squeezing the lemon? Is the squeeze worth the juice? I think there are... Well, the squeeze is hundreds of thousands of lives. You know, when we were discussed, I don't want to trivialize this, but we're not, we have millions of people who die of diseases every year on the world, easels. They will also continue to die. Yes. Just on top of that, on top of that. Just on top of that, so I think the strategy for this is, you know, we need a strategy that addresses the contagion risk, that addresses the morbidity risk and the mortality risk, right? We need such a strategy, but our ability, our ability to fight these things, whatever it is, whatever it comes up, requires a prosperous and financially sound economy. Because we're going to need resources. And if anyone thinks we can all sit around for a year waiting till we get better, till we go back to work, I think you're smoking some funny stuff because the cost of completely debilitating the U.S. economy is unacceptable. It's just... I'll tell you what I would, I tell you what I would do, and of course you can try to persuade me otherwise, but I would put tons of money into medical research. I would accelerate that vaccine as fast as human possible because I know that once people stop dying, once you can vaccinate, okay, then the economy and the market oil and gas including with it will go way high right away. And we'll have a huge recovery all around the world. I agree with you. Now here's an interesting question. We have lots of smart, and I think there are these things you see in life, well, it's just like 9-11, right? 9-11 seemed obvious after the fact. But before, no one thought about it. And I think this is a very interesting case. We have literally put 80, 90% of our intellectual capital and our brain power and resources in terms of future issues into climate, right? Bill Gates lectured in 2015 that he was worried about infectious diseases. I saw that, that was a remarkable lecture. In 2015, California had two mobile hospitals, massive supply of personal protection equipment and medicine. They dismantled it all because of a budget crisis. Governor Cuomo in 2016 decided not to buy $500 million with the ventilators. Instead, he put it into the Buffalo Billions Project, a solar facility which failed. So one of the things I think there needs to be a rethink on this, okay, what are the real risk facinesses of society? And are we spending the money properly? Why are we so bad at figuring out what the real versus the imagined risks are? And I think part of this is we have such an ability to understand that for longer term risks, we're resourceful, we can figure this out. We should have been working on infectious diseases. We should have had a plan years ago. This is such an obvious outcome. But it's only obvious after the fact. Yeah. Well, it's true. And we, as a democracy, sometimes when that's so smart, I'm saying it's not so great to be great again. It's what we have now is a lack of priorities, just as you say. In a complex society, I mean, living in a complex society, more complex by way of technology and the demands of so many people, you really have to have careful priorities. I mean, if you make a mistake on priorities, it's very costly. And we're experiencing that now. It's very interesting to figure out what do the state of Hawaii do? How do they allocate their government money? How much do they put into these exotic batteries of the wage technology, all this stuff? And what do they do? How much did they put into preparing for an infectious epidemic? Did someone think about whether this was possible? Probably not. Yes, and I think all of those things have to be examined closely because when you come out the other side of this, just as you say, you'll have to be very close attention to the priorities going forward. I absolutely think we need the equivalent of a 9-11 commission on this, a bipartisan commission to really dig into this and understand all the mistakes, including most of our, including the failure, prepare and understand that this was a real threat. So I have one more question, Lou. You know, it's like we've had something over 60 shows and of those 60, I mean, about coronavirus. And of those 60, a lot of them started off as a show about something else. And then, you know, invariably, people's attention went to what they really cared about. So here we start off, you and me, it's about oil and gas, updating the markets, looking at the prices, but invariably we go into coronavirus. So the question I put to you, we're gonna be back in two weeks. Anything could happen in two weeks. Nobody knows what will happen. What do you think we'll be talking about in debt? We're gonna be talking about the plan because in two weeks we're gonna have a plan, and ABL bought out, but we're gonna have a plan to exit this lockdown. I think there's no way, I don't care who's president, there's no way the American people will hang around their houses much longer than that without a plan. Yes, you're absolutely right. They need to see the end game. They need to see the end game. Yes. It can be speculative, but they need to see the end game. Yeah, that's gonna be the huge level of pressure has been amount. That's a little pretty easy. You know, we really have to get together in a room, Lou, unfortunately, that probably wouldn't be permitted by the distancing rules, but we can always talk on Zoom or on the phone. Lou, pretty easy, the president of EPRIG. Thank you, Jay. Thank you, Aloha. Talk soon. Aloha.