Reason for proposing oil buyers’ Club
The OPEC basket’s price today was $73.97 per barrel. Brent Crude also rose to $76.58 per barrel. As a result, Indian Basket will cost around $74.82 per barrel as it is the weighted average of Dubai and Brent (72.58:27.42). The WTI Crude today costs $66.79 per barrel. Astonishingly around $8 per barrel difference between Indian Basket and WTI Crude.
India and China together consumed 17% of world oil consumption last year. With around 80% of total consumed oil is imported, India is in desperate need for cutting its oil bill. By dumping zealously oil into the market for decreasing the price to $28 to almost freezing production and bringing it to near $80 per barrel, we have all witnessed how OPEC can create an havoc in oil business.
Beginning of the Change
At the 16th IEF ministerial meet in April this year, India and China agreed to look for ways to leverage the combined size of their imports for a better bargain. As a result, Indian Oil Corp (IOC) chairman Sanjiv Singh met Wang Yilin, chairman of China National Petroleum Corp (CNPC) in Beijing.
Earlier in 2005, then oil minister, Mani Shankar Aiyar, proposed to form an alliance with major oil consumers. He wanted to include China, Japan and South Korea. The main motive was to take up issues like premium being charged from Asian buyers. The proposal lost to the complexities of the bilateral ties between India and China.
Why should biggest consumers pay more. Why should these countries pay more in name of Asian premium,” Pradhan had said in April. “All the four major Asian economies should come together. And India will try to create a network for that within the four countries.”
If a sellers’ group exists then a buyers’ group should also exist in order to create the balance in the Trade Universe. OPEC always enjoyed extreme monopoly and no-one had the audacity to counter them. With Shale Revolution of USA on the cards, India, China and other major importers should utilize the newly found leverage and end OPEC monopoly.