REASONS FOR CHANGE IN CRUDE OIL

PRICE IN INTERNATIONAL MARKET AND ITS

IMPACT ON INDIAN ECONOMY

Submitted to : Prof. Veena Chavan

PRESENTORS

Priya Dhiman -10

Suchita Haldankar-17

Gurjit Kaur Kaler-22

Shivam Singh-47

Akruti Vetal -59

WHAT IS CRUDE OIL?

Mixture of naturallyoccurring hydrocarbonsthat is refined intodiesel, gasoline, heatingoil, jet fuel, kerosene,and literally thousands ofother products called petro chemicals.

OPEC - FOUNDED IN BAGHDAD, 1960

The organization of the

Petroleum Exporting Countries

(OPEC) is a group of 12

members that include Iran, Iraq,

Kuwait, Qatar, Saudi Arabia, the

United Arab Emirates, Libya,

Algeria, Nigeria, Angola,

Venezuela and Ecuador.

Venezuela was the first countryto move towards the

establishment of OPEC by

approaching Iran, Iraq, Kuwait

& Saudi Arabia in 1949.

REASONS FOR CHANGE IN CRUDE OIL

PRICES IN INTERNATIONAL MARKET

Rise in crude oil prices:

Currently oil sales are traded in terms of US dollars, changes in

the value of the dollar against other world currencies affect OPEC‟s decisions on how much oil to produce.

Falling dollar value puts pressure on oil exporting nations

Political tensions .

Rapid growth in Asian economies.

That led to large price spikes, and oil hovered around $100 per

barrel between 2011 and 2014.

Fall in crude oil prices:

Steadily rising supply caused oil prices to start dropping

from their June peak of $115 per barrel down to around $80

per barrel by mid-November.

That brings us to OPEC

OPEC meeting in Vienna on November 27.

SAUDI ARABIA was opposed to cutting production and seemed willing to let prices keep dropping.

In the end, OPEC couldn't quite agree on a response and

ended up keeping production unchanged.

That caused the price of oil to start crashing even further.

One of major cause for reduction in Crude Oil prices is the

production by non OPEC Countries, such as recent discovery of Shale Gas in US Oil Fields.

IMPACT OF CRUDE OIL PRICE

CHANGE ON INDIAN ECONOMY

India is not self-sufficient.

The Govt’s decision to hike the prices of petrol, diesel &LPG was inevitable.

The rate of inflation increased to 12.91% on August 2nd2008 mainly due to increased oil prices as oil is an universalinput that directly & indirectly enters into the cost ofproduction of every other commodity.

India’s total oil consumption is about 2.2 million barrels perday.

It imports more than 75% of its total oil consumption.

The transport sector consumes one –third of India’s oil

IF PRICE RISE THE

IMPACT WILL BE… the exact impact of the hikes would differ in different

cities due to local levies.

Eg: According to the Times of India, the rising crude oil

price can also weighing heavy on the Indian polyester

industry.

India will have to deploy its foreign exchange reserves

to pay the higher import bills.

In such a case, a depreciating rupee and widening

current account deficit will be back on the table.

if oil prices will rise Japan, China and India would be

most at risk given their dependence on oil imports.

And thus inflation will increase.

IF PRICE FALLS THE

IMPACT WILL BE…

The fall in prices is largely due to subdued demand by

consumers and oversupply by some OPEC producers

A one-dollar fall in the price of oil saves the country

about 40 billion rupees.

It is kerosene and liquefied petroleum gas (LPG) that

are still heavily subsidized.

Consequently, the fiscal deficit that in 2014-15 is

projected at 4.1 percent of GDP may be somewhat

reduced.

First, if the average fall in oil prices is about $4 per barrel

in 2014-15, the trade deficit will shrink by about $3 billion.

In the April-June quarter, the current account deficit

had dropped to $7.5 billion, mainly due to customs duty

on gold imports.

A recent note from Macquarie Capital Securities India

Pvt. Ltd highlighted that $10 per barrel fall in oil prices

reduces the import bill and the current account deficit

by $9.2 billion (0.43% of the gross domestic product).

The reduction in oil prices will reduce the import bill for

India and have a favourable impact on the external

account.

The subsidy burden for the government of India will

decline significantly because of fall in crude oil prices,

which will help contain fiscal deficit.

India is also benefiting from the decline in oil prices as it

has accelerated the disinflationary process.

CURRENT INFORMATION ON CRUDE OIL

MAIN CRUDE OIL SUPPLIERS OF INDIA

REFERNCES

https://data.gov.in/catalog/importexport-crude-oil-and-petroleum-

products#web_catalog_tabs_block_10

http://in.reuters.com/article/2012/08/06/india-crude-import-

idINL4E8IU4HI20120806

http://www.bloomberg.com/news/articles/2014-10-29/why-oil-prices-went-

down-so-far-so-fast

http://www.vox.com/2014/12/16/7401705/oil-prices-falling

http://www.moneycontrol.com/news/economy/how-falling-crude-prices-

impact-indias-gdp-inflation_1204783.html

http://blogs.reuters.com/india-expertzone/2014/09/11/how-falling-crude-

prices-affect-india/

THANK YOUANY QUESTIONS?