In a welcome move, India and China are working on combining their forces to counter Opec’s ability to dictate crude oil prices. The two countries together accounted for almost 17% of world oil consumption last year, making them ideally suited to take on the oil exporting cartel. Talks were held this week in Beijing on forming an oil buyers’ club. And should this come to fruition, buyers will have a significant say on prices.
After all, India and China are slated to fuel half of the global demand growth in energy in the next five years. Plus, with the US experiencing an oil and gas boom driven by shale fracking technology, New Delhi and Beijing have greater leverage to negotiate with Opec. Even in bilateral terms, India and China recognising their mutual interests in the oil market is a good thing. With the centre of gravity of the global oil market shifting to Asia, it is better for New Delhi and Beijing to cooperate rather than undercut each other.
Their combined strength should also give them a say over matters such as oil exports from Iran after the US pullout from the Iran nuclear deal. Taken together, an energy alliance between India and China will be a geopolitical game changer. This doesn’t mean that the two won’t compete for acquisition of overseas oil and gas fields. But as the two largest countries driving energy demand growth, New Delhi and Beijing can jointly usher in a buyers’ market.
Prasanta Patnaik