Presented by, Akshay Jari Suvigya Lal Nidhish Jain
Petroleum products are useful materials derived from crude oil as it is processed in refineries. It is estimated that world consumes around 88 million barrels of each day. Petroleum is derived from two words: Petra which means rock Oleum which means Oil in Latin
India consumes petroleum products of 4 lakh crores per annum. Growth of petroleum products was at 2.6% per annum in the Xth plan (2002-07) when the economy is growing at 8% per annum. Projected growth rate of India is about 2.4% per annum till 2030.
United States 1,91,50,000 China 94,00,000 Japan 44,52,000 India 31,82,000
Increase in Oil price leads to transfer of Income from importing country to the exporting country. Decrease in oil prices leads to be positive for importing countries and negative for exporting countries. Impact of Oil price increase for exporter country: Directly increases the real national income through higher export earnings.
Impact on Oil importer country: Direct effect on Income losses from hike in price of petroleum products. Impact at the micro level: Increase in price of petrol diesel. Increase in price of LPG Increased prices leaves the household to spend less money on other goods and services.
Increase in Inflation: Directly affect the prices of goods made with petroleum products. Indirectly affect the costs of Transportation, Manufacturing and Energy production etc. Increase in these costs has direct affect on variety of goods as producers pass their costs incurred on consumers.
Increase in Oil prices can depress the supply of other goods as they increase the cost of producing them. Increase in oil prices also affects the demand of goods because people are left with less money to spend on other goods.
Higher production costs. Lower Income for the companies. Higher subsidies provided to them by government. Increase in price of petroleum products.
India’s subsidy billed zoomed to 2.16 trillion or 2.5% of GDP. It was because of two reasons: High crude oil prices. Fertilizers subsidy primarily on account of imported non urea fertilizers.
If crude oil price goes up or down Inflation moves in the same direction. If crude oil prices increases it directly affects the inflation rate, for eg. When the prices of crude oil went to the high of more than $100 per barrel it also affected the inflation which was around 12.28% which was highest in past two decades.
When oil prices increases it affects the following: Inflation Increases. Government subsidy bill increases. Foreign currency reserve reduce. Exports become weaker. Investment decreases. GDP is affected negatively.