2. OVERVIEW
• What is Oil Crisis ?
• Oil Crises in 1973
• OPEC
• TOP 10 NATIONS PRODUCING OIL
• Reasons Behind 1973 Oil Crisis
• Present Scenario
• Impact of Oil Crises on Indian Economy
• Impact On India of US Sanctions
• What the Government can do ?
3. What is Oil Crisis ?
• Oil crises is a sudden rise in the price of oil
that is often accompanied by decrease
supply .since oil provides the main source of
energy for advanced industrial economies ,
an oil crises can endanger ECONOMIC &
POLITICAL STABILITY through out the global
economy
4. Oil Crises in 1973
• The 1973 oil crisis began in October 1973 when
the members of the Organization of Arab
Petroleum Exporting proclaimed an OIL
embargo (BAN).
• By the end of the embargo in March 1974, the
price of oil had risen from $18 per barrel to
nearly $40.
• The oil crisis, or "shock", had many short-term
and longterm effects on global politics and the
global economy. It was later called the first oil
shock.
5. OPEC
• It stands for Organization of the Petroleum Exporting
Countries
• It was founded in 1960 - Baghdad, IRAQ
• 1st five members of OPEC were
I. Iran ( Islamic republic of Iran )
II. Iraq
III. Saudi Arabia
IV. Kuwait
V. Venezuela
• GOAL - To increase it’s influence in World Oil Market &
Unify the petroleum policies of its Member Countries.
6. TOP 10 NATIONS PRODUCING
OIL
1) United States of America
2) Saudi Arabia
3) Russia
4) China
5) Canada
6) Iraq
7) Iran
8) United Arab Emirates
9) Brazil
10) Kuwait (Source :- www.investingnews.com)
7. Reasons Behind 1973 Oil
Crisis
• OPEC would decide the price and amount of oil.
President Nixon showed his support of Israel by
giving them $ 2.5 billion worth of arms
(weapons & Ammunitions)
• OPEC nations retaliated against those nations
supporting Israel by putting a Ban on trade oil
to other countries.
• As a result Of which the price of crude oil
barrels increases as its supply went down,
leading to it’s Scarcity.
8. Present Scenario
• US president Donald Trump's withdrawal from the Iran nuclear
deal sanctions were lifted on oil exports, which boosted oil
supplies and lowered prices. With the US pulling out now, the
sanctions are expected to be reinstated by August, curtailing
production and raising oil prices. Moreover, Opec has been trying
to push up oil prices after they collapsed in 2014 from over $115 a
barrel to below $30 as Russia, Venezuela and other Opec nations
stepped up production, and the US provided more shale gas.
Although prices subsequently cooled down after Saudi Arabia and
Russia said they planned to hike production by a million barrels a
day, some experts see oil crossing the $100 barrel mark if
Venezuela, with its staggering economy, is forced to shut down oil
production. That will be more bad news for India. According to
government estimates, every dollar per barrel change in crude oil
prices impacts the import bill by Rs 823 crore (the same when
exchange rate fluctuates by Re 1 per US dollar)
9. Impact of Oil Crises on Indian Economy
Oil constitutes 1/3rd of the countries total
imports.
Economic survey 2018 estimates that every
$10 per barrel increases in the price of oil
reduces growth by 0.2 - 0.3% points.
Induces Inflation
Rupee Exchange Rate
Hike In the Prices of Petroleum Products
11. Impact On India of US Sanctions
• India Could be affected by US decision to Pull
out of Iran Nuclear Deal and puts sanctions on
Iran
• Chabahar – If US have Much tougher
restrictions on Iran that makes india’s Chabahar
Plan more expensive and Unviable.
• INSTC – Us Sanction will effect international
North- South Transport corridor Plans
immediately.
13. What the Government can do
?
• The first way is to tell ONGC, India's domestic producer of oil, which has
reaped big profits from high crude prices, to sell crude at lower prices to
refiners, and in turn, compensate the firm by seeking lower dividends
from it this year.
• The second way is to bring fuel under the Goods and Services Tax (GST).
"Since the highest slab in GST is 28 per cent, the taxes will still be much
lower than they are at present
• The third way is to procure crude at a discount from OPEC countries,
instead of buying at the 'Asian premium' India currently pays
• "India also needs to build strategic reserves of oil, acquire equity interest
in international oil companies and diversify the energy portfolio as part of
a long-term sustainable energy security strategy
