Ongoing shifts in the dynamics of the global oil industry are undermining the relevance of one of its best-known price markers.

Saudi Arabia’s giant oil company plans to drop West Texas Intermediate, a type of light U.S. crude, as its benchmark for North American crude pricing. Saudi Aramco will switch to a new measure known as the Argus Sour Crude Index for its U.S. sales next year, abandoning WTI.

The WTI price measure has dominated North American oil trading – and conversation – for decades. It is based on oil sales in Cushing, Okla., and is one of two globally watched markers of crude. The other is Brent, which is based on sales in the North Sea.

There are several important technical reasons for the move by Saudi Arabia, the world’s biggest crude exporter. However, the shift also speaks to the slow, but dramatic, reshaping of the global energy landscape, as emerging countries take an increasingly prominent role in the oil trade.

The U.S. share of world crude use has fallen to less than 23 per cent in 2008 from 26 per cent in 2001.

In the past year, it has fallen by another 750,000 barrels a day, or 3.7 per cent. Countries such as China and India are expected to dominate future growth in oil demand.

As a result, the pricing of the U.S.-based WTI has begun to decline in importance. Although Argus is also a U.S. price, it is more closely linked with international oil and is seen as a more reliable indicator of global oil prices.

What it [the Saudi move] really speaks to is the demand shift in oil away from the U.S. and to other places in the world. That’s what’s really driving the bus?? said Jeff Rubin, the former CIBC chief economist and author of Why Your World Is About to Get a Whole Lot Smaller: Oil and the End of Globalization .

North American oil demand has peaked he said. What this really says is that whereas WTI in the past had been a premium price, now WTI is going to be a discount price.

WTI has, in fact, already slipped below its major benchmark competitor, North Sea-based Brent, several times in the past two years including in April, July and August.

The New York Mercantile Exchange, where WTI contracts have been traded since 1983, does not, however, expect the move to effect its thriving paper trade in oil futures and other derivatives. But the exchange is working to add an Argus sour crude contract later this year.

Saudi Aramco uses different crude benchmarks to set pricing of its product in the various global markets to which it sells. The company did not comment Thursday. Energy experts say its move to Argus will also allow it to better align its benchmark with the geography of its U.S. customers, the refiners located along the southern coast.

The Argus sour crude price is calculated daily from three Gulf Coast oil grades: Mars, Poseidon and Southern Green Canyon. Because those grades are more reliant on offshore imports, they can better reflect international pricing than WTI, which is an inland measure.

“Tying to a Gulf Coast marker will more directly tie to their trade and pricing,” said Stephen Fekete, managing consultant for international energy consultancy Purvin & Gertz. “In the crude price assessment world, it’s a big deal.”

The rise of the sour index could eventually affect Canada, too. Argus has already met with several Canadian companies, who expect to use TransCanada Corp.’s (TRP-T32.17-0.07-0.22%) proposed Keystone XL pipeline to send oil sands crude to the U.S. Gulf Coast. They have expressed interest in using the benchmark, said Euan Craik, chief executive officer, Americas, for London-based Argus Media, which publishes the sour crude index.

“It’s conceivable you could see Canadian barrels being priced against a sour crude index in the Gulf,” Mr. Craik said.

The Saudi departure from WTI, however, is being seen as a much less consequential change. Argus itself believes Saudi Aramco’s oil profits will remain neutral after it switches benchmarks. The company, which has used WTI since 1994, has seen its U.S. oil exports slip from an average 1.5 million barrels a day in 2008 to 766,000 in August.

The company may also have other, more technical, reasons for the shift. First, local supply and demand issues at Cushing have created distortions in the WTI price that bear no relation to world oil markets. That has reduced WTI’s usefulness as a primary benchmark.

Second, WTI is based on a light, sweet crude. Saudi Aramco produces primarily sour oil, meaning it contains sulphur, and a move to a sour crude index may simply be a move to a price benchmark that more accurately reflects its product.

Finally, Argus uses a different methodology to calculate its daily crude price than McGraw Hill’s Platts, the market data service Aramco currently uses. In that sense, it is a major win for Argus, which can now claim greater credibility for its own published product.