Analysis of Current Situation of Oil Distribution and Pricing Mechanisms in Asia
The demand for oil products in Asia, particularly in China and India, is now growing strongly. The demand is estimated to rise to 29.9 million b/d by 2015, demonstrating growth of 15% (approximately 3.9 million b/d) compared to 26 million b/d in 2009. As for supply, until 2008, Asian countries had strived to upgrade their refining capacities only proportionate to demand. Contrary to this, large-scale projects to upgrade facilities undertaken by China and India in 2009 pushed up the refining capacity to 28 million b/d, outpacing demand by 2 million b/d. China and India have plans to upgrade their refining capacities by 3.3 million b/d and 1.2 million b/d by 2015, respectively, which means that supply will surpass demand (29.9 million b/d) by 3 million b/d by 2015. These facts reveal the issue of overcapacity of refining facilities. It is important for the Japanese oil refining sector to curtail such overcapacity so as to achieve an optimal supply-demand balance, to promote trading of products with an emphasis on Japan's advantages, and thereby to reinforce its international competitiveness. Major Asian countries can be divided into two categories in accordance with their oil pricing mechanisms : i.e. countries where oil price is determined based on the free market mechanism, such as Japan, South Korea, etc; and countries where the oil pricing mechanism is regulated by the government, such as China, Taiwan, India, etc. It is important to keep a close watch on the countries with a regulated pricing mechanism, as the recent trend shows that these countries will take steps for deregulation in the future. Oil pricing is closely connected to demand. The climate of demand is the key factor for determining a profitable price. The Japanese oil sectors will need to strive to eliminate the factors which would be obstacles to fair pricing, by means of addressing the overcapacity so as to achieve an optimal supply-demand balance and coming up with effective frameworks to ensure a sound market. In addition, in order for the Japanese oil sectors to sustain their supply chains while maintaining an optimal supply-demand balance, they would need to move ahead to take restructuring steps including a new pricing mechanism so as to attain both "adequate refining margin" and "shortening time lags."
|Date of creation:||Jan 2010|
|Contact details of provider:|| Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200|
Web page: http://www.eaber.org
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:eab:energy:23120. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shiro Armstrong)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.