00:00Ellen, you are the voice that we wanted to talk to.
00:03What's your read on this?
00:04Is it a surprise?
00:04Does it make sense in terms of what we're seeing out of Saudi Arabia and Saudi Aramco?
00:09So I think it's interesting, mostly because Aramco has traditionally done most of its
00:14business in Asia in long-term contracts.
00:18So they've got long-term contracts for crude with Chinese refineries, Chinese petrochemicals,
00:24Korean, Japanese.
00:26They've got a lot of their kind of long-term contracts.
00:29They've got that basically locked up.
00:31And so what we're really seeing here, I think, is a very temporary situation in which there's
00:37a lot of crude oil that needs to move out of the Persian Gulf, basically to get things
00:43unplugged and get things moving again.
00:45So you had oil that was sitting in tankers that had already basically been bought that
00:50was just waiting to go.
00:51And we've seen a lot of that start to get moving out of the Gulf.
00:55But now we're seeing oil that's basically sitting in storage tanks onshore storage.
00:59That also needs to get moving.
01:01And they've got to get this stuff moving in order to get back to what we call normal business.
01:06Remember, we're also seeing a lot of declines in terms of gasoline, diesel, and other petrochemical
01:13and other petroleum products in the Middle East.
01:16They've got to get this stuff unplugged so that they can get back to selling these other
01:20cargoes as well, if that's possible, to move them out of the straighter form moves.
01:24And so the lower price, I think, reflects a lot of that backup, that they've got to lower
01:30the price enough to make it likely that Asian buyers will snap up these cargoes and also
01:38to make it worthwhile to charter a tanker to go into the Persian Gulf, collect this stuff
01:43and get out, because that is in no way assured.
01:46That process is still very much up in the air.
01:49And so I think that this is not necessarily something that we're going to see happen in
01:53the long term.
01:53This is a temporary thing just to get that market unplugged, so to say.
02:00OK, so you have to imagine, though, right, that if one producer is cutting prices, that's
02:05going to weigh on global oil markets more broadly, right?
02:09Exactly.
02:10And it is weighing on global oil markets more broadly, but it doesn't necessarily indicate
02:14that we're in some sort of oil glut.
02:16It's sort of like there's a glut in the Middle East because there's a backup getting things
02:20out, and that does impact prices all over the place.
02:24But, for example, someone who's trying to sell oil in, say, Houston or sell it in the Gulf
02:33of Mexico isn't going to have the same tanker issues as someone in Saudi Arabia.
02:37So they can command a higher price, not necessarily as high as they would like to on the market, but
02:44you know, because what's going on in one place does affect prices elsewhere, but they don't
02:49face the same issues, you know, getting a tanker in and out, for example.
02:53So we're really just seeing a lot of disconnect in the market.
02:57You know, we're also seeing these issues with gasoline and diesel.
02:59Gasoline prices are much higher than oil prices would indicate they should be.
03:04And that's really because, you know, we don't have enough refining capacity for the oil.
03:09And so they can't reduce their prices until, you know, either we get all of these kind
03:15of kinks worked out of the system, or we see more refining capacity come online.
03:20So, Ellen, it isn't like a bigger story of Saudi Aramco.
03:22Or are they as powerful as they were when you wrote that book back in 2018?
03:27They're extremely powerful.
03:28They've made a lot of money off of this crisis.
03:31I mean, it's not ideal for them, okay?
03:33They prefer to have oil prices fairly stable.
03:36They prefer to sell their oil and, you know, deliver it to their customers with, you know,
03:41great regularity.
03:42They would prefer not to have, you know, had to have cut production.
03:46But overall, this price cut is probably not seen as a major blow for them.
03:53I mean, there was a point where they were selling cargoes for over $140 a barrel.
03:57So they've made plenty of money.
03:59I think what they'd like to do is get things back to where they were.
04:03They'd like to be pumping more oil, producing more products, selling those cargoes on, you know,
04:08get the supply chains running again.
04:09And if they have to cut the price on their oil to get it out there, to get China to
04:14buy it,
04:15to make it worthwhile for China to buy it, just so they can, you know, fix the plumbing,
04:19so to speak, then they see that as worthwhile.
04:22Because they're in it for the long run.
04:24Right.
04:24How long does it take to get the plumbing fixed, essentially?
04:28Like, are we talking about a couple of weeks here or months?
04:30Have you ever tried to call a plumber?
04:31It just takes a while.
04:33That is definitely the question.
04:36It could take several months.
04:37It could take less.
04:39The market is incredibly resilient.
04:41But it also depends on a lot of factors, such as whether China is going to be enticed by these
04:46lower prices
04:46and willing to, you know, remember, China cut between four and five million barrels that it was importing.
04:53Is China going to say, hey, these are great prices, so we're just going to, you know, send those tankers
04:57in.
04:57And, you know, whatever happens, we'll see what happens.
05:00We're willing to take the chance because the price is so good.
05:02Or are they going to be more hesitant?
05:05Are they going to get back to, you know, producing a lot of gasoline and selling it around Asia?
05:10Or are they going to be more hesitant?
05:12That's definitely one factor.
05:13And so the same thing is with Iran.
05:16Are they going to clear the mines from the main corridor in the Strait of Hormuz?
05:21And will that be able to be used reliably, say, in a month?
05:24Or are we stuck with these, you know, Iranian northern lanes and American southern lanes?
05:30Ellen, I have to jump in just because we've got 30 seconds left here.
05:32I am curious about China because they are, of course, so important in terms of being a buyer of oils
05:38and in particular Iranian oil.
05:40But they have showed that they want to move towards make a greener transition even more quickly.
05:45And this has happened before where nations don't want to be dependent on another country for oil.
05:50And China doesn't make its own.
05:52So are we just going to see more of that just quickly?
05:55Well, I think we've seen that China is not dependent on foreign oil for necessarily they managed to cut their
06:02imports by a lot and still maintain economic function.
06:05But I don't think the answer is because of green improvements.
06:09All right.
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