India asks OPEC for uniform pricing policy

September 16, 2004

India Friday urged the Organisation of Petroleum Exporting Countries (OPEC) to adopt a uniform pricing policy for all buyers and not charge a premium from developing countries in Asia.

“Charging developing Asia a premium while offering a discount to the developed West is a conundrum that calls for rectification,” Petroleum Minister Mani Shankar Aiyar told the 132nd OPEC ministerial conference in Vienna.

“What we need is a uniform official selling price and significant spot trading of West Asian crude to increase liquidity and establish a genuine and representative marker crude oil for the fast growing Asian market,” he said.

India is the only importer among Asian countries to have been invited for the meet to present views on petroleum and sustainable development.

Aiyar said all Asian countries, barring Japan, were developing nations and accounted for two-thirds of the crude imports from West Asia. The Asian premium adds up considerably to the cost of import bill.

“Yet, all of Asia, including developed and developing Asia, pays higher FOB (freight on board) prices to fellow Asian producers than more distant consumers,” said Aiyar.

During 2003, Asian consumers paid about half a dollar per barrel more than US buyers and nearly two dollars per barrel more than European consumers.

In the April-July quarter this year, Asian countries paid 36 cents per barrel more than the US and close to three dollars per barrel more than European customers.

The Asian premium costs between $5-10 billion a year to Asian countries, according to Yoshiki Ogawa of the Japan’s Institute of Energy Economics.

Import dependent India estimates the premium accounts for $750 million to $1 billion of its over $18 billion oil import bill, according to petroleum ministry officials.

“Any measure that erodes the advantage of geography for Asian countries and promotes the accelerated depletion of oil resources through a policy of subsidising oil traffic to distant destinations is not, and cannot be, in the interests of sustainable development,” said Aiyar.

He expressed the fear that the premium would add to the burden on the top of soaring international prices this year, which unless sharply moderated in coming months, is likely to double the annual import bill.

Aiyar also used the occasion to announce India’s plans to host a buyer-seller roundtable early next year in New Delhi to discuss a new pricing mechanism.

Besides the major consuming centres of Asia – India, China, Japan and South Korea – six major West Asian oil producers including Saudi Arabia are expected to attend the meet.

The Indian minister also sought OPEC members’ cooperation to source energy efficient devices and technologies.

He drew attention to the fact that in the absence of energy efficient technology it takes “India nearly three times as much oil to produce one unit of economic output as in the OECD countries.”

–Indo-Asian News Service


Tags: Fossil Fuels, Oil