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Reasons for change in crude oil price
- 1. REASONS FOR CHANGE IN CRUDE OIL PRICE IN INTERNATIONAL MARKET AND ITS IMPACT ON INDIAN ECONOMY Submitted to : Prof. Veena Chavan
- 2. PRESENTORS Priya Dhiman -10 Suchita Haldankar-17 Gurjit Kaur Kaler-22 Shivam Singh-47 Akruti Vetal -59
- 3. WHAT IS CRUDE OIL? Mixture of naturally occurring hydrocarbons that is refined into diesel, gasoline, heating oil, jet fuel, kerosene, and literally thousands of other products called p etro chemicals.
- 4. 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 country to move towards the establishment of OPEC by approaching Iran, Iraq, Kuwait & Saudi Arabia in 1949.
- 5. 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.
- 6. 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.
- 8. 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 2nd 2008 mainly due to increased oil prices as oil is an universal input that directly & indirectly enters into the cost of production of every other commodity. India’s total oil consumption is about 2.2 million barrels per day. It imports more than 75% of its total oil consumption. The transport sector consumes one –third of India’s oil
- 9. 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.
- 10. 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.
- 11. 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.
- 12. 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.
- 13. CURRENT INFORMATION ON CRUDE OIL
- 15. MAIN CRUDE OIL SUPPLIERS OF INDIA