Oil Price since may 2014

1. Oil prices since May 2014
Presented By:
•Arti Tiwari
•Madhavi Wadurkar
•Jayesh Dandekar
•Rahul Gaikwad
Submitted to : Prof. ANAND SHRINGARPURE

2. Contents
 What is Crude Oil & Price of oil?
 What sets Oil prices?
 Trend of Crude oil Price in 2014
 Reasons of changing oil prices
 Impacts of changing oil prices
 Benefits of falling oil prices for India
 Future of Oil
 Conclusion

3. What is Oil & Price of oil
 Naturally-occurring substance/black stuff
 Made up of carbon, hydrogen and sulfur, originates from the remains of
animals and plants that existed millions of years ago
 Refine it in order to produce energy
 The price of oil generally refers to the spot price of a barrel of benchmark
crude oil.
 June 2014, the price of crude oil was up around $115 per barrel. As of
January 23, 2015, it had fallen by more than half, down to $49 per barrel

4. What sets Oil prices?
 Demand & Supply
 Consumption
 Financial markets
 Government policies

5. Trend of Crude oil Price in 2014
Month Price Change
Jan-14 102.3 -3.07%
Feb-14 104.8 2.51%
Mar-14 104 -0.74%
Apr-14 104.9 0.87%
May-14 105.7 0.75%
Jun-14 108.4 2.50%
Jul-14 105.2 -2.91%
Aug-14 100.1 -4.91%
Sep-14 95.89 -4.16%
Oct-14 86.13 -10.18%
Nov-14 76.96 -10.65%
Dec-14 53.60 -30.35%
Jan-15 48.24 -10.00%

6. Trend of Crude oil Price in 2014

7. Reasons of changing oil prices
 Current oil prices, driven down to historic lows as a result of oversupply from
the US shale market,
 Decreased demand from large consumers such as China
 OPEC's controversial move to preserve market share by not cutting supplies
 While the Libyan supply of light crude had been taken out of world markets
for a while, the following geopolitical events have kept oil markets on edge:
 Insurgency in Iraq – Islamic State in Iraq and Syria (or ISIS) threat to supplies
from giant oil fields
 Ukraine conflict involving Russia – a major supplier of energy to the world
 Israel-Gaza conflict – a region that is home to the world’s largest crude oil
deposits and supplies
 Possibilities that there is an international political conspiracy behind the
collapse of oil prices? (Not sure)

8. Impacts of changing oil prices
 Sectors will have a positive impact directly as well as indirectly
 Automobiles
 Plastic industries including pipes
 Chemicals and resins selectively,
 Paints
 Footwear manufacturers etc.
 Sectors will have negative impact
 Oil
 Gas companies.
These companies will feel a mixed effect. On the positive side, a lower oil
price means a lower subsidy burden.
Continued..

9. Impacts of changing oil prices
 Oil Producing Countries:
 Oil at lower levels is a dampener for the
world economy because the multiplier
effect of high oil on the economies that
produce oil is far greater than the
benefit of cost saving to oil consuming
economies.
 Low oil prices are a problem for oil
producers like Russia and Venezuela
which are in turmoil and their
economies are in deep trouble with
GDP degrowth of up to 5% expected.
 Saudi Arabia and the middle-east
producers will probably see sizeable
deficit in revenues from oil, which
could drain their forex reserves
substantially.
 Oil Importing Countries:
 Large oil consumers such as US,
China, Japan and India have
substantial savings in oil spend.

10. Benefits of falling oil prices for India
 The scope for elimination of diesel subsidy
 Assuming the rupee stays stable, the government has a golden opportunity to
market-link diesel prices
 Falling fuel prices have a direct effect on inflation, whereas indirectly they
lower production costs for firms with petroleum-based primary input
 Lower oil prices help in the management of India’s current account deficit
(CAD)
 Falling oil should provide a more conducive environment and more elbow
room for this new government to initiate bolder reforms
Continued..

11. Benefits of falling oil prices for India
 Foreign institutional investors have pumped in more than 260 billion
rupees into the Indian equity markets over the past three months
 Global liquidity has impacted Indian economy attracted liquidity and
valuations shot up
 the most obvious effects of falling oil prices is that it brings down
inflation and exerts a downward pressure on inflation expectations.

12. Future of Oil
 The shale and fracking induced boom in the U.S. has pushed
crude oil production to a 27-year high. Indeed, U.S.
dependence on petroleum imports has decreased by half since
2005
 Alternative technology which could replace Oil has been
announced by USA and might be made available to the world
market in future

13. Conclusion
When Oil prices Moves DOWN :
 Inflation Decreases
 Govt. spending on subsidy decreases
 For producing countries export
becomes weaker
 GDP is affected positively
 Share market crumbles
 Investment increases