 Okay, we're back. We're live for the three o'clock block on a given Wednesday afternoon. I'm Jay Fidel, and with me joining me from Mexico is Emily Medina. She's a research fellow at EPRNC, the Energy Policy Research Foundation, operating out of Washington. So welcome to the show, Emily. So nice to have you here with us. Hi, Jay. Thank you. It's a pleasure to be here. So a very important topic today, very important topic, a couple, three days ago over the weekend, I guess. We had an attack of drones on the Saudi Aramco oil facilities in Saudi Arabia. A very profound attack in the sense that there's a lot of oil that goes worldwide from that facility. And it did some damage. There were a number of drones. They did some damage. And we've heard news about whether this is going to affect oil supply and market or not. The administration has made statements about it, you know, suggesting it's no big deal. But then these days, one has to take that with a grain of salt. So we're really not sure, Emily, what, you know, what has happened in terms of the oil supply for the world and prices for the world. And we thought we'd ask you to let us know. So can you give us a handle on what has happened in terms of oil supply and what we can expect? So like you said, you know, there were some recent attacks on a major oil production facility in Saudi Arabia on Saturday. And just recently on Monday, we're already seeing an increase in prices by 20%. So we can see that the effect has been immediate on the gasoline crisis worldwide. So just to provide a little bit of context of what happened. So this facility in Saudi Arabia produces, all of Saudi Arabia has production of 12 million barrels of oil per day. This is a huge production, one of the largest in the world. So the recent attack represented a direct reduction in that production by half. So instead of having the production capacity of Saudi Arabia at around 12 million barrels of oil per day, we're having half of that. So we're having six million barrels of oil per day. So this is a huge decline on one of the biggest producers in the world. And this has direct consequences, like I said, in gas and prices worldwide. So it even affects places like the US, North America. And we can see this already impacting gas and prices. You know, Emily, it strikes me that we need to examine what market is served by these facilities in Aramco, Saudi Arabia. Are they serving a particular market that will be more affected than other markets? Well, the main alleys that Saudi Arabia has, and the main, so Saudi Arabia has a strict export market for its product. One of those export markets is the USA. So the United States is integrated to Saudi Arabia in that way that right now, although the US is close to being net oil and exporter, it still relies on imports of crude oil from places like Saudi Arabia and Mexico as well, and as well as other countries. So what happens then is that although the US claims that it's being energy independent and reaching energy dominant, although, you know, we see a lot of this rhetoric, I mean, it's still very hard for the US to be solely independent. And this is because the nature of the oil pricing is based on global market. So the US is still very much vulnerable to foreign shocks. Well, you know, I remember there was something in the newspaper from, I guess, the White House saying, don't worry about a thing. We have all these oil reserves. And we'll just, we'll, you know, deploy some of those reserves into the system. This thing in Aramco won't have any effect. What do you know what the extent of those reserves are? Is that a true statement? Will we be able to insulate ourselves from the effect of the attack by bringing oil reserves into the market? Yeah, so that's a good question. And I mean, there's a lot of components to disintegrate, to understand what's happening in terms of those reserves. So the total supply from those reserves is 640 and 40 million barrels of oil per day. So that's the total number of reserves that we have in case of any emergency. And what happens with that is that we need to be careful on how we manage those reserves. And right now, I mean, the tactic has been to be cautious on withdrawing and supplies from those reserves and to just, you know, try to mitigate the direct shock by, you know, reducing our consumption and managing the demand as best as we can in that controlled way. So instead of, you know, immediately going and taking oil from the reserves, we need to first try to handle this issue as best as we can. You know, when you think about utilities and the generation of electrical power and so forth, and you think about either, you know, internal problems, maybe fires or some damage from weather, extreme weather, for example, or if it just goes online because it failed for some reason, at least in Hawaii, we don't have a big storehouse of extra parts. We don't have a, you know, necessarily a backup generator available. And we, you know, we either have to rely on, you know, the sophisticated switching equipment in the grid, or we have to send away and try to fly in or, you know, bring in at the most expeditious manner, you know, replacement parts and whatever the equipment that was damaged, we have to find it in the world and bring it in. So I was thinking, as soon as I heard about this Aramco thing, that these drones, A, they did damage by exploding in and around the oil equipment in Aramco, and B, they caused a fire, which is going to melt the steel or whatever the material is in the facility, and somebody's going to have to fix that up before you can increase back from, what was it, 6 million barrels a day to 12. And it's not like Saudi Arabia has a big industrial complex where they can make a call and have this thing fixed overnight. That's not the case. They're going to have to, you know, order it, maybe have it fabricated in Europe. They're going to have to ship it over there. They're going to have to install it, maybe redesign the system to accept the new part. It sounds like a project. And I would assume that in the situation I described in the utility company or in the situation I described in Aramco, this is not overnight. This is not, you know, days or weeks. It's probably months at best. So getting back from 6 million to 12 million barrels is something we're going to have to wait on. My first question then, is that true, what I imagine? And the second is, what happens while we're waiting? Yeah, that's a good question. So yeah, that's exactly right. I mean, this thing, I mean, it's going to take a lot more to get fixed. So there's some projections that the production will normalize by the end of October or by early November. That to me seems then very optimistic. And there was a recent announcement by the newly nominated energy minister in Saudi Arabia who said that there was going to start bringing production as quickly as possible. And this wasn't, I mean, mainly to, I would say, to calm the market and to not have, you know, a drastic panic attack throughout the, you know, globally and have the, you know, the economy affected by it. So that now, like you said, you know, it's going to take months for production to normalize. And at the meantime, what countries can do? I mean, the countries with the, that are not equipped in their infrastructure in terms of storage and pipeline integration with other countries are going to be the most energy secure out of this whole, you know, it's a conflict in terms of a disruption in global oil supply. So I think that's a very important thing as we talk about energy security globally, no matter what it means, because you hear some countries like Mexico saying that they want to become actually self-sufficient and to reduce their import to become more energy secure. And we need to understand the global context of energy. And so it's not necessarily that those who are secluded from other countries and their energy supply are going to be the most energy secure. Yeah, well, you know, let's take a walk down that path. What I found interesting from a technological point of view is that these drones, wherever they came, whether they came from Yemen or Iran or any, or Iraq, whatever they came from, and we can make our own guess. I don't think we know for sure just yet. These drones are a new kind of weapon. I remember two weeks ago, we learned that the Israelis were very concerned about drones that were being assembled in western Syria, and they went and bombed them. And the reason was that they found that these drones were not the kind of drones that merely shoot things. These drones were bombs. They were explosives. And so the person who flies the drone, the instruction giver of the drone, can direct the drone into a target, and then the drone acts as a bomb. I suspect that what happened here is those kinds of drones were used. They have a maximum payload, much more than the kind that shoots things. And when they land, they really blow up good. So this is a whole new world. The Israelis saw it correctly, I think, in western Syria. That's why they were concerned enough to go bomb the facility where they were being assembled. And in this case, I think it should give us some pause because, as you said, energy security is very important. It's a strategical activity in the U.S., in Mexico, and all through the Middle East in parts of Asia. And so we now are in a new world. Are we not? These drones, which can be very anonymous, they've sent relatively anonymous, you know, a place from an anonymous place, these drones can do incredible damage. Small drones that are bombs can do incredible damage to a targeted facility where the technology will take the drone exactly where it needs to go and destroy energy, you know, oil facilities in a way that damages maximum, thus undermining energy security in that location. And, I mean, if we weren't sure that this kind of thing could happen I mean, yeah, and it's very interesting that this energy attack affects the whole world. So, and this is because it's directly affecting one of the largest oil facilities in the world. If it was a utility system, a grid, a power grid, we wouldn't lose the global impact as we're having today. So, as we work forward and as, you know, our systems become more digitalized, we're going to see other types of risks emerging, such as cybersecurity attacks and our power systems that can likely affect a country or a couple of countries that are in a close proximity and fed by the same energy infrastructure. But it's going to be a different type of energy security threat that does not have much of a global repercussion. Yeah, so if you were designing an energy facility, an oil facility, such as a Ramco Saudi, right now today, a brand new one, you would design it differently. You would design it to protect it against this kind of attack, which has just emerged. And you would take steps to create security against this, you know, new and threatening technology. And I might note that I don't think anybody's come up with an actual solution for the existing facilities. These drones can get through whatever defenses there are and penetrate them with impunity. They can be directed at a critical part of the oil infrastructure and do their damage, you know, with very little chance of being stopped. Somebody, maybe the US, has got to figure out how to stop them. Otherwise, there will be no energy security on the planet that somebody, you know, a mischievous actor, a state actor included, could affect oil security anywhere, anytime using this kind of technology. Am I right? Yeah, that's totally and completely correct. So just a sample of how the US is affected right now by the Saudi Arabia attacks is that if we look at California on the West Coast, there's not the infrastructure that's necessary to move oil, domestic oil in the US to that demand center. And it currently receives its crude oil supply from Saudi Arabia to produce the state's gasoline. So that's a direct impact on the US economy and what have you. Well, let me visit with you on one thing you said earlier, Emily, which caught my attention, and that is I asked you, you know, whether it was a specific market or markets affected being served by a Ramco Saudi Arabia. And you said, well, the US was one of the big markets there and so forth that would affect the US, even though we have our own supply. We still need a Ramco supply. And maybe that's why this administration and previous administration. Right. And maybe that's why the US and previous administrations have been so determined to maintain, you know, relations, positive relations with Saudi Arabia, even though Saudi Arabia has been guilty of very offensive acts like the bombing of Yemen and like the assassination of Khashoggi, the Washington Post reporter. But we're still in our geopolitical interest, especially when it comes to energy. Yes, right. So it's a it's a balance. And maybe you can make a wrong decision there in the in the morality of it. Let me let me pursue one thing, you know, so so OK, so the oil is dedicated to certain markets. But the fact is that when you have a failure of supply reduction of supply in one market, that affects other markets so that we live in a global world, right? Yes. And any market affects all markets. Tell me how that works. Yes, I mean, what better example to explain this than the US-Mexico energy relation? So right now, like we said, you know, the US is affected because there is a cut in and Saudi Arabia's oil production. And so that that not only affects the US, it also repercutes and affects Mexico. So Mexico right now imports 60 percent of its gasoline. And that gasoline is mainly coming from the US. And as the US struggles to satisfy its own domestic demand, it is going to have repercussions on on the exports that it sends to Mexico and gasoline. So by Mexico being, you know, integrated to to the US, it has several benefits. It also has, you know, downsides. And a way that Mexico can mitigate that downside is by investing in its energy infrastructure and building out storage. Because right now in the current and the current situation in Mexico is that there's only two days worth of gasoline storage in the country. Oh, wow. Compared to the US storage that has around, I don't know, 20 days. Wow. So this is, you know, a scarcity in our energy infrastructure. Well, you've described the supply side of it. And indeed, I mean, if we don't, you know, we don't have the same supply coming up Saudi Arabia. And if that that has this kind of trickle down effect or trickle across effect across the planet, then there'll be supply problems in the supply chain everywhere, because we'll all try to have to compensate for the lack of supply from Saudi Arabia. But the more interesting question really, maybe it's equally interesting question is, you know, the complete picture. Yeah, this has to do with the fact that the oil is priced in a global market. So countries like Mexico, you know, with the passing on the energy reform, they took out the subsidies and are gasoline. And right now, the gasoline is being priced in a global market. So if prices go up globally, it affects for, you know, every consumer at the gas station. There's no way around it. So if we find because of the problems in the supply chain and supply, that there, you know, there are hiccups in various places on the supply, we can likewise expect there'll be an increase in the price for the lack of that supply. And that increase will not just be in one place, it'll be in all places that are affected by that. That means globally we'll have an increase in the price of oil, right? Yes, that's exactly right. And there's an estimate of that price increasing about 15% to 20%. During the period between now, during the period between now and the time that the facility in Saudi Arabia is repaired. Exactly. This is because from one day to another, 6% of our global oil supplies came offline. So now, you said that the U.S. had a certain reserve 20 days, I think. And Mexico had a smaller reserve three days and so forth. Two days, sorry. Yeah. And so now, you know, October is more than that away. And I guess the question that comes to my mind is, and we're not sure it's going to be done fixed by October, even the end of October, it may go into November. Yeah, I mean, that's an optimistic outlook either. Yeah. And of course, as you get into November, all the temperate climates are going to get colder and be more of a demand for fuel for heating. And so that creates further demand. So I guess my question is, are we going off the brink here? If we don't finish it, you know, the repairs in October, we go into November and December, and we are sort of out of oil. We run into very short supply. What happens in the world market? What happens on the supply side? What happens on the pricing side? Well, I think those countries who have the strongest infrastructure will be the winner out of the situation. Those with weaker infrastructure are going to realize larger pain from this current event. So countries like the U.S., I mean, having such a large satellite storage, it puts a band-aid over the current situation and can, you know, and help withdraw gradually supply from those strategic research. That'll be a scrambler. And this is a measure that's undertaken by the International Energy Administration. And this is one of the best practices globally, and that is to have a strategic reserve in, you know, in the countries that are part of the International Energy Administration. It becomes difficult to manage that, doesn't it, Ali? It becomes difficult to manage that. It becomes difficult to manage that if you have a global demand in, say, a market that requires more for heating oil, and you have a supply that's seriously limited. You know, all the best plans of mice and men may not solve the problem, and you may have a scramble for whatever oil there is. Am I right? The system may not work. Yes. And right now, luckily, Saudi Arabia is prioritizing exporting oil to its markets because it wants to be seen as a reliable supplier of oil. And so by doing this, you know, instead of using it domestically, it's exporting as much as it can. One other point I'd like to cover before we have to go, Emily, is this. You know, there are those that feel that this drone attack is a direct result of the administration's ongoing argument and name calling with Iran. And in fact, President Trump has said that he would like to, he is considering putting American troops on the ground to, you know, to respond to the attack. I'm not sure what he'd do. And he wants, he wants, he wants, I'll see, Saudi Arabia to pay for it. Saudi Arabia is oil rich, I mean, or cash rich, because of the oil. And so, you know, what you have is the American, you know, the American presence, the American interest, obviously, we want to, you know, preserve this pipeline, so to speak. And I wonder, you know, if you take all of that together, everything we've been talking about here, you know, what is an appropriate position for this country to take to restore the supply and to protect the supply in the future? Because whether he's right or wrong about where it came from and whether it needs to, you know, do fisticuffs, the fact is that we have an interest in preserving this supply of oil. So what do you recommend? If Donald Trump were on the line with us today right now, Emily, what would you tell him? Yeah, I mean, I think diplomacy is key in addressing those types of issues and preventing them. And I think this is an issue that could have been prevented by having an open dialogue with Iran and with the European countries. And trying to put and actually measures in Iran that wouldn't cost the country to go as far as this is going to to attack, you know, the Saudi Arabia, Saudi Arabia's facility. Thank you, Emily. Emily Medina. Very, very helpful, very helpful. Thank you very much for helping us with these very difficult issues in these difficult times. Emily Medina, who is a researcher for EPRINC in Washington, D.C., and right now she joins us from Mexico. Thank you so much, Emily. I hope to speak to you again soon. Yeah, it's my pleasure, Jay. Aloha.