yes, and the IEA presentation makes the point that some (Asian) refineries are marginally economic as the margin between sour and sweet crude reaches historic highs.

One reason is that lower sulfur in street-side fuels are increasingly mandated in Indonesia, Australia, Vietnam and other Asian-region countries.

The other reason is that most Asian refineries can only handle sweeter crudes. They are captive to a continued supply of sweet crude.

The global significance is that (in 2005, assume not much changed) Asian refineries handle about 25% of total global crude production.

Local Asian sweet crudes lead the world in price. Today, Minas crude, from Indonesia, overtook Tapis, from Malaysia, as the highest ever price for a crude oil ($US148.66).

Smaller Asian refineries that don't own a share of the 'cheap' sweet fields (i.e.less than $US80 a barrel investment/development assumptions,as Rokman says below) will no longer be viable, and may be closed (as at least one refinery in Australia was, about ?2005).

Ultimately, this must squeeze regional refinery capacity. China, which was - until about 2003 - a major gasoline exporter to Asia, can no longer help. Therefore, more distant light crudes have to be found. 'Draw-off' of low sulfur crudes from non-traditional sources support global sweet crude prices, including US prices. The Asian region can no longer supply its own needs. So long as regional governments have the money, Asia will increasingly look to import sweet oil from outside the region.

This may create an upward spiral on prices beyond the Asian region. Only very large demand destruction in Asia (and/or beyond) can collapse it.

We await the end of subsidized petrol in Indonesia, Thailand, Malaysia, Taiwan, India, Philippines and Vietnam.

In effect, we await the very severe decline in these Asian economies. Oh, all right, financial collapse.

China, as someone here observed, has enough US dollars as reserves to subsidise gasoline for many decades, so must be 'stood out'.

The price consquence of all this? Oil companies that both produce and refine their own sweet crude within Asia have the 'whip hand', they have a handsome degree of freedom to expand the profit margin for their products to the limits of tolerance of their market.

Given the inevitable drive-down in oil product prices in a coming Asian economic collapse, who can blame them for making hay while the sun shines?

And if they drive those refineries without 'company owned' supplies of crude into the red, then out the back door, so much the better!

Ironically, they can substantially 'phat up'the wholesale price of gasoline to the street-side retailer, knowing that the gas station owners will be blamed for the price hikes - even when retail margins remains static!

You will notice that oil companies always point to 1. the price of crude, and 2. thin retail margins as proof they aren't price gouging.

They don't mention the refinery profit margin in the middle of upstream + downstream integrated operations!

Cheers,
Lorenzo