In This Presentation i try to cover all Measure aspect that Effect Oil Pricing and also Effect on Indian Economy.

1. BY :-
15BPE139D
UTTAM Chodvadiya
Falling Crude “OIL PRICE’’ and Its
Impact on Indian Economy

2. Introduction
Crude Oil, often called “Black Gold” is naturally occurring, unrefined petroleum
product composed of hydrocarbon deposits.
Trade of crude oil across the globe is one the major factors in determining the G.D.P
and financial policies of various countries across the globe.

3. Types of Crude oil
West Texas Intermediate (WTI) crude oil is of very high quality and is at refining a larger
portion of gasoline. Its API gravity is 39.6 degrees, which makes it a "light" crude oil, and it
contains only about 0.24 percent of sulfur (making a "sweet" crude oil).
• Crude oil quality is measured in terms of density (light to heavy) and sulfur content (sweet
to sour).
• Sweet crude is commonly defined as oil with a sulfur content of less than 0.5%, while sour
crude has a sulfur content of greater than 0.5%.
Brent Blend is actually a combination of crude oil from fifteen different oil fields located in the
North Sea. It is still a "light" crude oil, but not quite as "light" as WTI, and it contains about 0.37
percent of sulfur (making it a "sweet" crude oil, but again slightly less "sweet" than WTI).

4. From 2010 until mid-2014, world oil prices had been fairly stable, at around
$110 a barrel. But since June prices have more than half. Brent crude oil has
now dipped below $50 a barrel for the first time since May 2009 and US crude
is down to below $48 a barrel.
The reasons for this change are twofold - weak demand in many countries due
to low economic growth, coupled with surging US production.

5. Oil
Demand
OPEC
Prod.
Decisions
Oil
Supply
Strengthen-
ing
Dollar
Non-OPEC
Supply
Growth
Economic
growth
GLOBA
L
OIL
PRICE

6. Reasons of Falling Oil Prices

7. Increased output from Libya
2
US Oil Boom
Oil Production in the US has increased as Shale oil production has gone up to 4
million barrels per day. As such, US import of oil from OPEC has reduced by half.
1
Increased Global Supply
Global supply of oil has surpassed the global demand,
which has resulted in the fall of prices.
Because of the civil war in Libya, oil production had decreased to 150,000 –
250,000 barrels per day. It now produces 1 million barrels a day, which may go
upto 1.2 million barrels a day by next year.
3

8. 6
Asian demand has dropped off:
The US is producing record amounts of oil, and there’s plenty of supply out of OPEC
and Russia. But there’s not enough demand from developing economies – Like China
and India.so supply is more than demand.
5
Political events and Crises.
4
OPEC Infighting
There is a rivalry among OPEC members, who are trying to lower prices to
maintain their market share
War, natural disasters, political upheaval and new government leaders are all
factors influencing crude oil pricing. For example Hurricane Katrina caused a large
price increase in 2005 when it destroyed hundreds of oil and gas platforms and
pipelines.

9. OPEC's surprising response: Let prices keep falling
On November 27, a big meeting was held by the Saudi Arabia
and countries, like Venezuela and Iran, proposed that the Saudi
Arabia decreases oil production in order to maintain stability in
the oilprices.
Just to ensure it maintains its market share, Saudi Arabia, the
world's largest oil producer, did not agree to reducing oil
production and was willing to let prices failing.
1
2

10. Impact on Oil Exporting Countries
There will be winners and
losers. Falling oil prices could
be “a shot in the arm” for the
global economy.
The fall in crude oil price is
good for all users, including
major importers like
India,china.
However, for the oil exporters,
this is bad news as it lowers
their export earnings, and
given that most countries are
dependent on oil exports,
their growth would suffer.

11. Effect of falling oil prices on Russia
More than half of
its budget
revenues come
from selling Oil
and Gas
The Russian
economy may go
into Recession if oil
prices keep falling
Russian budget
heavily
relies on
its oil
income

12. Russia is the world’s largest crude oil producer.
Russia gains 70% of all tax revenues from oil and gas.
Russia’s economy is expected to shrink 4.5% next year if oil stays at $60 per barrel.
The plunging price of oil has also caused the ruble's value to collapse.
´
Oil revenues makes up 45% of the government budget and falling oil prices will lead to a
government budget deficit, and will require either higher taxes or government spending.

13. Effect of falling oil prices on US
This will translate into
accelerated economic growth
to a forecasted 3.5% next year.
Falling oil prices will cause
gas prices to go down, which
will result in increased
consumer spending.

14. 2. SaudiArabia
 Saudi Arabia is the world's second-largest crude producer after Russia.
 It produces 10 million barrel perday.
 It will suffer financially from cheapoil.
 If oil stays at around $60 per barrel next year, the government will run a deficit equal
to 14% of GDP.
 This is why Saudi Arabia has so far not responded by cutting output.
 Still, if low oil prices continues, Saudi Arabia may have to cut back on some of the
social programs.

15. History of Oil Prices
Global
Financial
crisis
Civil war in
Libiya
Increased
Demand in
China
Economic
Recovery

16.  Oil prices fell sharply in the second half of 2014.
 Demand declines, which has a negative impact on oil prices. During the 2008
financial crisis, crude oil prices declined from the peak of $147 per barrel to $32 per
barrel.
 Four-year period of stability around $105 per barrel.
 From June 2014, the global oil prices started a trend of downward shift.
 From $115 per barrel it touched a low of $45 per barrel in Jan 2015.
 This decline being the largest since the 2008 decline when prices fell from a whooping
$145.85 per barrel to $32 per barrel.
Overview Of Graph

17. How does the fall in oil prices affect India ?
 India, which is the fourth largest consumer of oil, is a big beneficiary of falling oil
prices.
India imports nearly two-thirds of crude oilrequirements.
 The reduced prices will not only lower the import bill but also help save
foreign exchange.
 And It will also enable oil marketing companies to reduce retail prices of petrol and
diesel.
 Lower oil prices have also aided government's efforts to keep inflation low
and stable besides curtailing fuel subsidies

18. As per rough estimates, a $10 fall in crude could reduce the current account
deficit by approximately 0.5% of GDP and the fiscal deficit by around 0.1% ofGDP.
 With every dollar decrease in oil prices, the government's oil import bill comes
down by Rs. 4,000 crore.

19. 11%
18%
5%
10%
22%
34%
Iran
Other
Africa
Saudi Arabia
Western Hemisphere
Other Middle East
India’s Oil Import

20. Oil Pricing in India

21. ON BOARD PRICING:
- It is price that ongc or IOC or anything pays from the company. It is the base price.
- one barrel of crude oil is Rupee's 3243(today). one barrel equals 158 litres. so 3243/158 is
. 21 which is the amount of 1litre of crude oil.
COST AND FREIGHT PRICE.
-This 21 is the FREE ON BOARD PRICE .Now this is transported through some ships or
freight for which certain amount is paid called cost and freight price.
- It may cost around 4or 5 Rupee's per litres .
- After reaching port it must pay insurance, port due,custom dues and so on.
- It may turn to another 20 rupees per litre.
- So the price of the petrol while reaching the dealers is around 45.
EXCISE DUTY AND OTHER'S:

22. VALUE ADDED TAX (VAT) :
This differs from state to state .it will be 28%for it would cost Rupee's 15 added with the
pollution cess.
So the price of the petrol is 60.
DEALERS COMMISSION:
It would be some 3or 4 rupees per litre
So finally is your retail price of 64 or 65 rupees.

23. Government view for not passing benefit to end users
• The primary reason is to reduce consumption. India already suffers a lot
from environmental problems with its major cities already among the
most polluted in the world.
• The government also says we are spending this money saved in
infrastructure.