End of the Asian premium on oil?
Resource-scarce economies, such as China, India, Japan and South Korea, have long been heavily dependent on oil from the Middle East, giving producers there the upper hand in pricing. The surcharge, known as the “Asian premium,” has averaged about $1.20 a barrel since 1988.
Now, the tables are turning, handing an advantage to the region’s fast-growing countries in the form of relatively less expensive energy.
In March, Saudi Arabia, the world’s largest oil exporter, sold its Arab Light crude to Asia for $6.37 less per barrel than it charged European buyers … Kuwait and Iraq also followed suit … though official statistics aren’t yet available.
The latest flip in prices has led many analysts to conclude that fundamental changes in the global oil trade will soon eliminate the Asian premium for good, eliminating a drag on the region’s economy. In 2008, for example, Asian customers bought about 14 million barrels of oil a day from the Middle East, according to BP Statistical Review of World Energy. The premium averaged $8.08 a barrel that year, amounting to about $41 billion. (via Economic Clout Earns Asia an Oil Discount – WSJ.com).
One by one, each Asian country has been able to pull itself out colonial cess-pit that seemed bottomless at one point of time. Barring a few like Pakistan, Bangladesh, Afghanistan, some Central Asian republics, Asia is truly on its way out of the 20th century misery.
There are two economic miracles. One we have seen.
It is a miracle that Asia has been able to come out of its poverty pit, where it found itself in the 20th century – especially after WW2.
The greater miracle will be when Europe and Middle East find a way to rebuild their economic model – without the Asian premium!
And that is the miracle we may not see!