Crud oil Gold Dollar

7/29/2019 Crud oil Gold Dollar

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CRUDE OIL, GOLD PRICE,

DOLLAR PRICE

SUBMITTED BY:

MANPREET KAUR

GAVESHNA

PALAVI

SHIVANI GOEL

RAHUL RAJ


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CRUDE OIL


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CRUDE OIL

Crude oil commonly known as petroleum.

It is a liquid found with in earth.

Composition: Hydrocarbons (50-97%)

Organic compounds

(N2,O2,S) ( 6-10%)

Small amounts of metal

(Cu,Ni,Vn,Fe) (


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MARKET STRUCTURE OF CRUDE OIL

Oligopolistic market structure

Cartels are formed by oil producing countries

Most important players in oil market are:-

a) The organisation of the pertroleum countries ( OPEC )

b) Non OPEC countries

Saudi arabia plays dominant role in the oligopolistic oil market.

From econometric evidence on saudi arabia, there isconformation of assymetrical behaviour of low cost petroleumsupplier i.e. the country restrictes production in reaction tonegative demand shocks, but does not expand production inresponse to positive ones.


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TOP 5 OIL PRODUCING COUNTRIES

0

2

4

6

8

10

12

SAUDI

ARABIA

RUSSIA UNITED

STATES

IRAN MEXICO

MILLION OF BARREL PER DAY

SAUDI ARABIA

RUSSIA

UNITED STATES

IRAN

MEXICO


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TOP 5 CONSUMER OF WORLD

0

5

10

15

20

25

UNITED

STATES

CHINA NORWAY IRAN UNITED

STATES

MILLION OF BARRELS PER DAY

UNITED STATES

CHINA

NORWAY

IRAN

UNITED STATES


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Supply of crude oil

Oil production is not labour intensive andtherefore oil supply can be controlled easily byreducing depletion rates without affecting the

labour market . No short term substitutes for petroleum; change

in supply effects market

Price elasticity of demand is highly inelastic i.e.

no effect on demand due to price change OPEC contributed 78.3% of oil reserves and

48.7% of exports


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Gulf countries have lowest production cost

i.e. USD 4-5 per barrel as compare to thenorth sea and brazil where production cost

is about USD 9-13 per barrel

Top 5 oil exporting countries


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TOP 5 OIL EXPORTING COUNTRIES

0

1

2

3

4

5

67

8

9

10

SAUDI

ARABIA

RUSSIA NORWAY IRAN UAE


SAUDI ARABIA

RUSSIA

NORWAY

IRAN

UAE


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Demand side of crude oil

Demand of oil depends upon various factor

Demand of individual household and firms

Oils importance for the economy and national

security


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TOP 5 IMPORTERS OF WORLD

0

2

4

6

8

10

12

14

UNITED

STATES

JAPAN CHINA GERMANY SOUTH

KOREA


UNITED STATES

JAPAN

CHINA

GERMANY

SOUTH KOREA


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IMPACT OF CRUDE OIL PRICES ON

WORLD ECONOMY

It is estimated that 100 USD oilwould reduce the economic growth

by 0.2-0.3%.

The global economy would not be affected asmuch because emerging economies consume

less oil, than industrialized countries do.

Many developing countries subsidize the costof gas.


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IMPACT OF CRUDE OIL PRICES ON

INDIAN ECONOMY

Indias crude oil import bill maycross 100 billion US dollars if the

global price stays firm at 100 -120

USD/barrel.

If it continues it will upset the

delicate fiscal balance.

Rising crude oil prices will impact inflation

whether the govt absorbs the burden or passesit to consumer by increasing prices ofpetroleum products.


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Indias oil import bill in the 11 months of

2010- 2011 was USD 85 billion and

reported to reach 90 billion USD.

India imports nearly 80% of its crude oil

requirement, spent 79.95billion USD in

2009-2010.

The recent strengthen of crude oil prices

could impact economic growth

momentum in the country.

C O S C


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CRUDE OIL RISE CAN HAMPER

GLOBAL RECOVERY

IMF (International MonetaryFund) has warned that rising

prices of scarce natural resources

could aggravate poverty.

Just as the US & global economies are finallystrengthening, they face a new danger:Rocketing oil prices, which topped 120 USD abarrel.


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The main factors that would be responsible

for economic growth moderation in 2011-12

would be crude oil(CO) prices & RBIstightening of monetary policy in response to oil

prices.

Rising crude prices will lead higher inflation &

higher inflation attracts monetary tightening.


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Rising oil prices could threaten the European

economy which are net importers of oil & gas,havent recovered fully from financial crisis &

face heavy debt loads.

Rising oil prices would push up inflation in

Europe, where it already exceeds official

targets.


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GOLD

Gold is a dense, soft, shiny, malleable andductile metal.

Gold has been a valuable and highly precious

metal for coinage, jewelry & other arts since

long before.


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Gold standards have been the most

common basis for monetary policies

throughout the human history.

The world consumption of the new gold

produced is:

Jewelry -50%

Investment -40%

Industry -10%


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GOLD PRICES IN INDIA

CITIES GOLD (10g)(Rs)

Chennai 26700.00

Mumbai 26590.00

Delhi 26980.00

Calcutta 27040.00


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FACTORS DETERMINING RISE IN

GOLD PRICES

Now the main issues to be discussed here

now are:

1) Why is that investors wants to buy

gold?

2) What is the impact of rising gold prices

on rest of the economy?


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WHY INVESTORS BUY GOLD?

1) Investors buy gold as a safe heaven.Gold is known to perform well when

the rest of economy is in poor state &

investors buy gold to protect them-

selves financially.

Gold prices rises whenever there is uncertaintyabout economic prospect or in financial market, eg.

American & European debt crisis lead to increase indemand for gold.


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2) Investors buy gold to protect themselvesfrom currency debasement.

We can interpret the rise in gold pricesmean that investors expect future inflation

to be high.

Rising gold prices mean that investors are

fearful about economic aspect & aboutexcess inflation.


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IMPACT OF RISING GOLD PRICES ON

ECONOMY

1) Impact is negative.Investors are putting more money

into gold & less in businesses &

productive investment.. Money invested in gold doesnt

create output or employment Whereasmoney invested in businesses in economywould do so. Thus investment for gold isnegative for economic growth.


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GOLD PRICES IN INDIA

In India gold prices have gained 29%since the start of the year compared

with just 15% gain in stock market.

Indian gold imports rose 47% to 265

tonnes in the last quarter of 2010,

continuing a strong trend to end at a little

over 950 tonnes last year.


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US DOLLAR STRENGTH,WEAKNESS &

PRICE OF GOLD.

When the USD gets stronger, it takes few dollarto buy gold ie. priced in $USD. When the USDget weak then it takes more dollar to purchasegold.

CHANGE IN THE PRICE OF GOLD IS REALLY AREFLECTION OF A CHANGE IN THE VALUE OF $USDOLLAR.

WHEN THE DOLLAR GETS STRONG THEN GOLDAPPEARS TO GO DOWN & VICE VERSA.


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GOLD & DOLLAR GRAPH


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GOLD PRICE FLUCTUATIONS IN

RECENT YEARS

In March 2008, the gold price exceededUS$1,000, achieving a nominal high of

US$1,004.38.

After the March 2008 spike, gold prices

declined to a low of US$712.30 per ounce in

November.


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Pricing soon resumed on upward momentumby temporarily breaking the US$1000 barrieragain in late February 2009 but regressedmoderately later in the quarter.

Later in 2009, the March 2008 intra-day spotprice record of US$1,033.90 was broken severaltimes in October, as the price of gold enteredparabolic stages of successively new highs whena spike to $1226 of the price to the mid-October levels.


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On August 22, 2011 gold reached a new

record high of $1908.00 at the London

Gold Fixing.


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Economic growth is fairly strong in India ascompare to rest of the world.

It is growing at a slower rate but still above 7%.So India doesnt face the same debt problem

that western country faced.

RBI has been raising interest rate & tightening

monetary policy. So to reduce inflation RBI isreducing the rupee in circulation.


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DOLLARS


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ABOUT DOLLAR United States dollar sign: $; code: USD; also abbreviated

US$), also referred to as the American dollar, is the officialcurrency of the United States of America.

It is divided into 100 smaller units called cents or pennies

is used as the standard unit of currency in internationalmarkets for commodities such as gold and petroleum.

is the currency most used in international transactions

is one of the world's reserve currencies( is a currency that isheld in significant quantities by many governments andinstitutions as part of their foreign exchange reserves).

FACTORS AFFECTING VALUE OF US
http://en.wikipedia.org/wiki/Currency_signhttp://en.wikipedia.org/wiki/Dollar_signhttp://en.wikipedia.org/wiki/ISO_4217http://en.wikipedia.org/wiki/Currencyhttp://en.wikipedia.org/wiki/Currencyhttp://en.wikipedia.org/wiki/United_States_of_Americahttp://en.wikipedia.org/wiki/United_States_of_Americahttp://en.wikipedia.org/wiki/Currencyhttp://en.wikipedia.org/wiki/United_States_of_Americahttp://en.wikipedia.org/wiki/Cent_(currency)http://en.wikipedia.org/wiki/Cent_(currency)http://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/Reserve_currencyhttp://en.wikipedia.org/wiki/Currencyhttp://en.wikipedia.org/wiki/Foreign_exchange_reserveshttp://en.wikipedia.org/wiki/Foreign_exchange_reserveshttp://en.wikipedia.org/wiki/Foreign_exchange_reserveshttp://en.wikipedia.org/wiki/Currencyhttp://en.wikipedia.org/wiki/Reserve_currencyhttp://en.wikipedia.org/wiki/International_tradehttp://en.wikipedia.org/wiki/Cent_(currency)http://en.wikipedia.org/wiki/Cent_(currency)http://en.wikipedia.org/wiki/United_States_of_Americahttp://en.wikipedia.org/wiki/Currencyhttp://en.wikipedia.org/wiki/ISO_4217http://en.wikipedia.org/wiki/Dollar_signhttp://en.wikipedia.org/wiki/Currency_sign


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FACTORS AFFECTING VALUE OF USDOLLAR

SUPPLY & DEMAND- These are decreed byinternational trade between countries.

When dollar traders from other nations pay

for our product and services in dollars afterconverting their currencies into dollar, when

this done demand for dollar is created.


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1) BALANCE OF TRADE Also known as

current account balance.

The balance of trait represents the differencebetween exports & imports in terms of goods

& services.

If exports exceed import in either currentaccount, it is called surplus.

If imports exceed export then it is called

deficit.


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The US has been running a trade deficit with therest of world in recent times. This makes theforeign investors increasingly nervous & can

affect the dollar significantly.

2) FALLING PRICES ON FOREIGN GOODS Whenthe prices for foreign goods decreased they

become more attractive for American consumer& create a trade deficit.

When there is rise in price of foreign goodsbecause of increase in demand can make the

American goods more attractive & narrow thetrade deficit. This increases the value of dollar.

3) BALANCE OF INVESTMENT Wh th US


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3) BALANCE OF INVESTMENT When the USimports more then it exports so investorsfrom other countries have to buy US assets to

keep the dollar from falling.

4) BUDGET DEFICIT & NATIONAL DEBT- The US

Govt budget can affect the dollar value.

5) LITTLE OR NO DEFAULT ON DEBT- When the

Govt keeps a good credit history, risk goesdown & the dollar goes up.


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6) PRESIDENT POPULARITY Popularity of theUS president id tied to value of US dollars.

7) TERRORIST ATTACK & WAR- Attacks damageconsumer & business confidence hampers theeconomic growth.

8) CONSISTANT POLICIES- If investor feel thatthings will remain same they will flop to dollar

because it is safe. This increases the demandthus increases the value of dollar.


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9) GOVERNMENT EXPANSION- New

departments & increase govt functions cost

money. Like other govt expenses expandingnew groups like TSA & department of

homeland security can lower the dollar value

due to their opportunity cost against otherexpenses in the budget.


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RELATIONSHIP BETWEEN CRUDE OIL,

US DOLLAR AND GOLD PRICE

Gold is the real currency while dollar is only therepresentative hence the trend is people tend tofavor gold to dollar when there is high inflationand diminishing dollar and vice versa

in short term there is no any clear cut cause andeffect relation BUT A LONG term trend analysisshows negative correlation between gold prices

and the value of dollar but gold price does notincrease proportionately to the diminishingdollar.


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QUE - If there is RISE OR FALL in US dollar then whatwill happen to GOLD PRICE RISE OR FALL???ANS - If the US dollar falls, Gold will remain the samefor the rest of the world. But, for the U.S., we will end

up paying more for the same amount of gold QUE - If there is RISE OR FALL in US dollar then what

will happen to CRUDE OIL PRICE RISE OR FALL ????

ANS If the US dollar falls, Oil prices will rise for the

U.S., but oddly, it will fall for other countries. This isbecause crude oil is primarily traded in U.S. dollars


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QUE-. if there is RISE OR FALL in CRUDE OIL

PRICE then what will happen to GOLD PRICE

RISE OR FALL???

ANS- Since oil is used in the process of

excavating and refining the gold, if oil prices go

up, so does gold prices


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FIVE YEAR TREND OF CRUDE OIL


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FIVE YEAR TREND OF GOLD


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CONCLUSION

GOLD AND CRUDE OIL HAVE POSITIVE

RELATIONSHIP

US DOLLAR AND GOLD HAVE NEGATIVE

RELATIONSHIP

US DOLLAR AND CRUDE OIL HAVE NEGATIVE

RELATIONSHIP


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THANK YOU

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Crud oil Gold Dollar