On the night of November 11, 1940, Royal Navy aircraft attacked Italian battleships at anchor in the port of Taranto, Italy. Using 20 fabric-covered biplanes flying at night, the UK dropped bombs including torpedoes. Most failed to explode.
The British flyers did manage to hit three battleships in their surprise attack, two of which were returned to service within six months.
It was not the Royal Navy’s best work.
A little over a year later, the Japanese sent 355 aircraft to attack the United States Fleet at the port of Pearl Harbor. They destroyed 174 planes, damaged another 128, and sank or damaged eight U.S. battleships, three cruisers, three destroyers, and four auxiliary craft.
The lesson taught at Taranto was that Navy ships in port were no longer safe. The United States military failed to listen, but the Japanese military was paying attention.
Over the weekend, Saudi Arabia was drone-attacked by Iran or Iran proxies. The bombs hit Saudi Aramco oil facilities and removed somewhere between 5% and 7% of oil production from the global market. Bloomberg has called it the “Saudi Pearl Harbor.”
As I write this, oil is trading at $60.17 — not a large premium from the mid-$50s it was trading at last week. Five years ago, such an attack would have spiked oil to the $160s. You should thank a fracker for the fact that you aren’t paying $7 for a gallon of gas today.
Back on Line
At first, Saudi Aramco said its oil would be back in a few days. Now the government is saying it could take weeks. They are also talking about delaying the Saudi Aramco IPO.
Saudi Aramco is the state-run oil company and is expected to bring in over $1 trillion in the IPO — making it the world’s largest company.
However, the Saudis are divided. The oil company wants to project competency before the IPO. The government wants oil prices to be higher to increase revenue.
Now the internet is going crazy with conspiracy theories.
Here is one post I found:
So here is my theory okay. The Saudis bombed their own oil fields to spike the price of oil for the upcoming Aramco IPO. Higher oil price equals higher IPO price. But they just cant bomb the shit out of the oil fields, they need someone to blame it on or else it looks suspicious. So they get these half rate ISIS Yemeni bastards to claim responsibility for the “attack” maybe they pay them or pull some favors. I don’t know but they agree to take the blame.
This sort of stuff is nonsense. The Saudi leader, MBS, wouldn’t be around very long if it came out he was bombing his own oil fields. He made a lot of enemies when he consolidated control of the kingdom.
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A better question might be how Saudi Arabia was attacked in the first place. The country spent $67.6 billion on arms last year. It spends more on defense than any country except China and the United States.
You would think they would have anti-drone defense systems in place. It is obvious that drones are the future for asymmetric fighting as well as civilian needs.
In the U.S. alone, the FAA expects the number of drone systems to grow between 30% and 42% a year over the next three years.
The oil facility attacks were made by drones produced cheaply in Iran. But that’s not the only drone attack this week.
An attack by drones on Heathrow Airport in the UK was stymied by signal jammers. Their lights were flashing on the runway but they couldn’t fly. Nineteen environmental wackos were arrested, presumably for attempted mass murder.
This got me looking for drone defense stocks.
There are a number of startups like Citadel Defense that have drone-jamming technology. But I couldn’t find any pure-play public stock.
Obviously, Boeing (NYSE: BA) and Northrop Grumman (NYSE: NOC) are big players in drone technology, but they are so multidimensional that drone market growth will not make an impact on their share price.
AeroVironment, Inc. (NASDAQ: AVAV) is the go-to drone company with a market cap of $1.51 billion. It is up $14 to $63.40 over the last two weeks. The company recently beat estimates, earning $0.74 a share last quarter. Revenue was up 11% year over year.
The company just launched its newest iteration of drones as well as an unmanned helicopter that looks pretty spiffy.
Another drone stock is Ambarella, Inc. (NASDAQ: AMBA). The company also jumped over the last two weeks, climbing from $43.20 to $64.68. The company makes semiconductor processing solutions for HD video, video capture, and analysis, which is used in drones.
The downside is that GoPro was a big customer. The plus side is AMBA is picking up business as Chinese competitor Huawei is on the outs. The stock isn’t cheap but has had solid growth around 24% a year for the last several years.
The end point of all this rambling is that it isn’t 2002 anymore. The United States isn’t the sole possessor of drone technology. This is a technology, by the way, that means unseen instant death delivered from halfway around the world.
The question is, will the U.S. learn the lesson from the drone attacks on the Saudi oil fields? The answer is no. If past is prologue, it won’t learn any more than it learned from Taranto, Italy, in November of 1940.
All the best,