Description
IMPACT OF CRUDE OIL PRICE ON INDIAN ECONOMY
Impact Of Crude Oil Price On Indian Economy
Presented By • Nilesh Patil – 23 • Manali Gaonkar - 7 • Priti Raut - 29 • Abhijit Patil-21
What Crude Oil
• Crude oil is a naturally-occurring substance found in certain rock formations in the earth. • It is a dark, sticky liquid classified as a hydrocarbon. This means, it is a compound containing mainly carbon and hydrogen. • Crude oil is highly flammable and can be burned to create energy. • Petroleum= Petra (Rock) + Oleum (Oil) (Latin)
Crude Oil Production
India Kuwait UAE Mexico Canada China
Thousand Barrels Daily
Iran
US Saudi Arabia Russia 0 2000 4000 6000 8000 10000 12000
Source: BP Statistical Review of World Energy 2011
Crude Oil Consumption
Russia
Thousand Barrels Daily
India
Japan
China
US
0 5000 10000 15000 20000 25000
Source: BP Statistical Review of World Energy 2011
Source: BP Statistical Review of World Energy 2011
India’s Oil Import
11% 34% 18%
5% 10% 22% Iran Saudi Arabia
Other
Africa
Western Hemisphere
Other Middle East Source: Global Trade Atlas
Energy Consumption In India
7%
24%
1% 42% 24%
Oil 2% Nuclear Combustible Renewables and Waste Other Renewables Coal Source: The International Energy Agency
Consumption of Major Petroleum Products
9%
8%
40%
36% 7%
LPG Diesel All other products
Kerosene Petrol
Source: Ministry of Petroleum Basic Statics
Crude Oil Price
Source:- Energy Information Administration and Bureau of Labor Statistics 2012
Factor affecting crude oil price
• • • • • • World oil demand World oil supply Weather conditions Government policy Political Conditions Futures Market
Subsidy
• India’s subsidy bill zoomed to Rs 2.16 trillion or 2.5% of GDP . • It was due to two reason: ? High Crude Oil prices ? Fertilizer subsidies, primarily on account of imported non-urea fertilizers. • Last year budget government pegged curde oil price of brent at $90. This year they kept the same at $115. • Next year government has reduced the budgeted amount for oil subsidy to Rs43580 crore.
Crude Oil Subsidy
78% jump
Chart Title
80000 60000 40000
20000 0
Rs in Cr
Crude Oil Subsidy 2010-11 2011-12
Source: Budget document
Impact of increase in oil prices on growth and inflation levels in India
GDP=Private Consumption + Gross Investment + Govt Spending + ( Export – Import).
International oil prices per barrel ($) 50 60 Increase in international oil prices (%) Extent of fall in manufacturing sector (%) 2.1 9.7 Extent of fall in GDP growth (%) Extent of increase in WPI (%)
38.9 66.7
0.4 1.9
1.5 3.6
70
80 140
94.2
122.2
16.9
24.5
3.4
4.9
5.7
7.9 7.2
126.1 29.7 7.3 Source:- Extractive Industries for Development Report
Inflation
• Crude oil price move up or down, inflation follows in the same direction. • Crude oil price increases, it’s directly affects the rate inflation. When the prices went to high of more than $100/barrel in 2008, the inflation also went up to 12.27% which was highest for India in previous two decade.
Effects on Transportation
13% 7% 14%
61% 5%
Transport
Non-Energy
Other sector
Electricity and Heating
Industry
Source:- Report of the Working Group on Petroleum & Natural Gas Sector for the XI plan (2007-2012)
• The transport sector is clearly dominant in petroleum product consumption. • Transport sector consumes 60% of total petroleum products. • Road transport accounts for an even higher percentage of energy consumption.
Steps taken by the govt. and RBI
? What Govt. did ? 1. Provided huge amount of subsidies to oil companies to keep them solvent. 2. This increased domestic prices of diesel and petrol. 3. Start looking for alternate energy options to prevent future oil shocks. ? What RBI did? Increase in CRR, Repo rates. (i.e. used monetary tools to calm down the heat)
Conclusion
To summarize the study When Oil prices Moves UP : 1.Inflation increases 2.Govt. spending on subsidy increases 3.Foreign currency reserves reduce 4.Our export becomes weaker 5.GDP is affected negatively 6.Share market crumbles 7.Investment decreases
Thank You
doc_817088868.pptx
IMPACT OF CRUDE OIL PRICE ON INDIAN ECONOMY
Impact Of Crude Oil Price On Indian Economy
Presented By • Nilesh Patil – 23 • Manali Gaonkar - 7 • Priti Raut - 29 • Abhijit Patil-21
What Crude Oil
• Crude oil is a naturally-occurring substance found in certain rock formations in the earth. • It is a dark, sticky liquid classified as a hydrocarbon. This means, it is a compound containing mainly carbon and hydrogen. • Crude oil is highly flammable and can be burned to create energy. • Petroleum= Petra (Rock) + Oleum (Oil) (Latin)
Crude Oil Production
India Kuwait UAE Mexico Canada China
Thousand Barrels Daily
Iran
US Saudi Arabia Russia 0 2000 4000 6000 8000 10000 12000
Source: BP Statistical Review of World Energy 2011
Crude Oil Consumption
Russia
Thousand Barrels Daily
India
Japan
China
US
0 5000 10000 15000 20000 25000
Source: BP Statistical Review of World Energy 2011
Source: BP Statistical Review of World Energy 2011
India’s Oil Import
11% 34% 18%
5% 10% 22% Iran Saudi Arabia
Other
Africa
Western Hemisphere
Other Middle East Source: Global Trade Atlas
Energy Consumption In India
7%
24%
1% 42% 24%
Oil 2% Nuclear Combustible Renewables and Waste Other Renewables Coal Source: The International Energy Agency
Consumption of Major Petroleum Products
9%
8%
40%
36% 7%
LPG Diesel All other products
Kerosene Petrol
Source: Ministry of Petroleum Basic Statics
Crude Oil Price
Source:- Energy Information Administration and Bureau of Labor Statistics 2012
Factor affecting crude oil price
• • • • • • World oil demand World oil supply Weather conditions Government policy Political Conditions Futures Market
Subsidy
• India’s subsidy bill zoomed to Rs 2.16 trillion or 2.5% of GDP . • It was due to two reason: ? High Crude Oil prices ? Fertilizer subsidies, primarily on account of imported non-urea fertilizers. • Last year budget government pegged curde oil price of brent at $90. This year they kept the same at $115. • Next year government has reduced the budgeted amount for oil subsidy to Rs43580 crore.
Crude Oil Subsidy
78% jump
Chart Title
80000 60000 40000
20000 0
Rs in Cr
Crude Oil Subsidy 2010-11 2011-12
Source: Budget document
Impact of increase in oil prices on growth and inflation levels in India
GDP=Private Consumption + Gross Investment + Govt Spending + ( Export – Import).
International oil prices per barrel ($) 50 60 Increase in international oil prices (%) Extent of fall in manufacturing sector (%) 2.1 9.7 Extent of fall in GDP growth (%) Extent of increase in WPI (%)
38.9 66.7
0.4 1.9
1.5 3.6
70
80 140
94.2
122.2
16.9
24.5
3.4
4.9
5.7
7.9 7.2
126.1 29.7 7.3 Source:- Extractive Industries for Development Report
Inflation
• Crude oil price move up or down, inflation follows in the same direction. • Crude oil price increases, it’s directly affects the rate inflation. When the prices went to high of more than $100/barrel in 2008, the inflation also went up to 12.27% which was highest for India in previous two decade.
Effects on Transportation
13% 7% 14%
61% 5%
Transport
Non-Energy
Other sector
Electricity and Heating
Industry
Source:- Report of the Working Group on Petroleum & Natural Gas Sector for the XI plan (2007-2012)
• The transport sector is clearly dominant in petroleum product consumption. • Transport sector consumes 60% of total petroleum products. • Road transport accounts for an even higher percentage of energy consumption.
Steps taken by the govt. and RBI
? What Govt. did ? 1. Provided huge amount of subsidies to oil companies to keep them solvent. 2. This increased domestic prices of diesel and petrol. 3. Start looking for alternate energy options to prevent future oil shocks. ? What RBI did? Increase in CRR, Repo rates. (i.e. used monetary tools to calm down the heat)
Conclusion
To summarize the study When Oil prices Moves UP : 1.Inflation increases 2.Govt. spending on subsidy increases 3.Foreign currency reserves reduce 4.Our export becomes weaker 5.GDP is affected negatively 6.Share market crumbles 7.Investment decreases
Thank You
doc_817088868.pptx