2. Oil Price – Is it demand or supply
factors?
Recent fall in oil price has analysts conclude that the
glut of supplies is causing an alarm fall in price.
● OPEC's in action in cutting production signals price
war and the intent of the cartel to put shale oil out of
business
● But a more sustainable demand dynamics is
responsible for the recent glut of Oil prices.
15. Summary
● US GDP growth last Qtr 2.4% but oil consumption fell 0.3%
● Head winds of Oil consumption
– Improved efficiency of motor vehicles
– Urbanization trend which means less motoring miles by the
youth/working class
– Renewable energy push – Wind /Solar etc
– Popularity of plug ins like Tesla with better battery technology
– Carbon emission commitments to rein in global emissions
16. Closing Thoughts
● Oil price fall along with rise of Dollar index poses a
serious conundrum for emerging market central banks –
Should they defend their currency to fend off external
threats or should they allow their currency to depreciate
in the pretext of more exports
● The former action makes good economic sense in the
longer term while the latter may boomerang because the
expected export growth may not come through and the
country may end up importing Inflation!
17. Thank you for your time.
Presentation authored by:
Avisekh Rakshit
(avisekh@yahoo.com)
● Date: 10th Dec 2014
Data Sources: Bloomberg, Publicly available data
from DOT & other Govt. agencies