Asian oil importers may try to persuade their core Middle East crude suppliers to bring down sky-high prices when they meet this week, but for the time being, at least, they cannot claim to be unfairly singled out. Since September, for the first time in many years, refiners in Japan, South Korea, India and China have paid less for Saudi and other Middle East crudes than the United States or Europe.
The estimated $1.00-$1.50 a barrel "Asian premium" has cost importers an extra $5-$10 billion every year, a recent US study showed.
But a massive shift last year in prices between light, low-sulphur crudes - coveted for their ability to make gasoline and heating fuels - and heavier high-sulphur grades mostly produced by Middle East countries, has wiped out the premium.
"I think it's going to be a bit difficult for us to talk about the Asia premium this time given oil prices in Europe and America are higher now," said one South Korean energy official.
Europe's sweet benchmark Brent crude soared to a premium of $12 over Asia's sour Dubai marker last year on Western demand for the premium grades.
Although it has since halved, analysts say it will take years to build the heavy-crude refining capacity needed to fully restore the balance.
"This suggests that the premium for light-sweet crude oils, such as (US futures benchmark) WTI, will be higher in 2005," said Wall Street bank Goldman Sachs in a research report.
Saudi Arab Light crude, for instance, has been as much as $3.00 cheaper for Asian lifters than for refiners in Europe or the United States, one global buyer said.
LIMITED LEVERAGE: Asia has geography and geology going against it.
US buyers draw from a vast pool of short-haul Venezuelan and Canadian supplies as well as alternatives from fast-growing producers in West Africa, Russia and the Caspian.
Asia, home to only 4 percent of the world's reserves but almost a third of global demand, has little choice but the Middle East, where two-thirds of all known oil resources are located and dominated by member-nations of the Organisation of the Petroleum Exporting Countries (OPEC).
As China and India lead global oil demand growth, the region's import needs will continue to climb from an estimated 13 million barrels per day (bpd).
To source crude from more distance oil-rich regions would drive up shipping costs considerably - hence the premium.
Asian governments have stepped up meetings like Thursday's producers-consumers' gathering in New Delhi in an effort to boost their clout, but even as a group they have limited leverage in the market.
A vague proposal to unify crude purchases for more than a dozen different refiners across the region looks unrealistic; strategic stocks such as those planned in China and India may cushion supply shocks, but not change pricing policies.
The Asia premium may have disappeared for now, but not for good.
"It's about economics, not politics. If the Saudis put all their oil into Asia, they would flood the market," one senior oil trader said. "They are charging what the market will bear."
OPEC BLAMELESS: Even calls to bring down global oil prices - which rose by a third last year - may be met with helpless shrugs, as 2004's burst of oil demand from China eroded global spare capacity and severely limited Opec's ability to cap soaring prices.
"There's nothing they (consumers) can say. Opec has done everything that could be asked of it in the last six months," said independent analyst Geoff Pyne.
Instead of focusing on a $1-$2 premium, national energy officials may put more emphasis on the need for long-term agreements, which would give Asian countries more supply security and provide producers the guaranteed long-term demand needed to invest billions in expanding production capacity.
Taking on more multi-year contracts in the mould of last month's 10-year deal between Kuwait and South Korea's SK Corp - something Western firms are loathe to do - might convince producers to trade their price premium for guaranteed growth.
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