Per Stratfor, Asian importers (e.g., India, China, Japan, South Korea, Taiwan collectively representing over 20% of world oil demand, 80% of which being Persian Gulf imports) pay a $4/barrel premium over their Western counterparts for Gulf oil. This is because Western economies have options (Russia, Venezuela, Canada, Mexico, Africa) while Asian economies (being distant from these alternative supply options) have less flexibility.
To address this, a number of Asian Governments & refinery operators met recently in New Delhi with Gulf oil producers. A number of ideas were discussed including establishing a local crude benchmark to compete with their Western equivalents -- Norwegian Brent and West Texas Intermediate -- or signing multi-year contracts in order to lock in favorable rates. Chinese and Indian delegates -- representing economies that have been growing like kudzu -- in particular felt the Middle Easterners should give them a good deal. After all, their logic went, they would be providing the bulk of the world's demand growth during subsequent years.
Stratfor thinks this will amount to nothing because Asians have little bargaining leverage. Their only viable alternative supplier is Russia -- from which pipelines will have to be built at massive capital cost and, likely, a decade of effort. Armed with this knowledge, the monopolist Gulf states are unlikely to relax their extortion from our economies.
Financial Times of London feels the same way calling the situation old-fashioned mercantilism.
Mercantilism or not, those Indians (mostly fellow secularists) who fail to see the OAPEC cartel (we are deliberately excluding Iran with whom India has just signed a $40 Billion energy deal) as a strategic threat to our interests simply do not understand ground realities. Cartel members, Saudi Arabia in particular, are extorting money from our over-burdened taxpayers and consumers, then using these ill-gained profits to export virulent jihad to our sphere of influence. This is an existential threat to India against which the only real, albeit serendipitous, counterpunch so far has been the American neo-conservative project.
When the so-called progressives (e.g., the enormously misguided Arundhati Roy and Michael Moore) decry America's neo-conservative intervention in Arabia as an oil-motivated war, we can only hope this is, at least partly, so. Afterall, the burden of high-priced Gulf oil is falling squarely on India's poor and the emerging middle class -- even worse, profit from this oil funds jihadi terrorism which seeks to kill them. Any change in this dynamic is good for Indians, therefore good for India. That many Indians support these extortionist Sheikhs and dictators, scrambling to keep their blood-dimmed crowns, continues to baffle us.
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