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Oil price rout - demand or supply factors??
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.
US gasoline prices have fallen 
steeply in recent times
US gasoline consumption is falling on the back 
of better fuel efficiency of vehicles
US Oil production have increased sharply 
in the recent years adding to the supply glut
Oil consumption per GDP have shown a 
sustained down trend in US economy
Oil cons vs GDP growth correlation is breaking down 
US GDP growth last Qtr 2.4% but oil consumption fell 
0.3%
Changing Demographics
Urbanization drive is also lessening 
the vehicle miles travelled
Increase use of public transport system is driving down 
Oil consumption
Increased investments in 
renewables
US shale oil is making US net 
exporter of energy
As a result imports have fallen from 
OPEC
US is becoming the net exporter of 
crude
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
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!
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

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Oil price - Demand or supply factors at work

  • 1. Oil price rout - demand or supply factors??
  • 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.
  • 3. US gasoline prices have fallen steeply in recent times
  • 4. US gasoline consumption is falling on the back of better fuel efficiency of vehicles
  • 5. US Oil production have increased sharply in the recent years adding to the supply glut
  • 6. Oil consumption per GDP have shown a sustained down trend in US economy
  • 7. Oil cons vs GDP growth correlation is breaking down US GDP growth last Qtr 2.4% but oil consumption fell 0.3%
  • 9. Urbanization drive is also lessening the vehicle miles travelled
  • 10. Increase use of public transport system is driving down Oil consumption
  • 12. US shale oil is making US net exporter of energy
  • 13. As a result imports have fallen from OPEC
  • 14. US is becoming the net exporter of crude
  • 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