Future of Oil (1)

8/6/2019 Future of Oil (1)

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By: Group 2

Gunjan Jain (190)Henna (194)

Sachin Sharma (220)

Sant Nikhil (222)Satyendra Shukla (224)

Vishesh Garg (239)


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A fundamental change is comingsooner than you might think

y Mankind hasdepended on fossil fuelsince theindustrial revolution 200 yearsago.

y Growingconcernsupply of oil may peakasconsumptiongrows,knownsupplies run out.

y Oil hasnever been moreexpensive

y Growingenvironmentalconcern

y That givesalternativesourcesa real opening


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Alternate Energy Sources

y Alternativesneed to becheaper,easier to use.

y Rich-worldgovernmentsneed to encourage thealternatives.

y Taxingcarbon, removingsubsidies that favour fossilfuels.

y Using that subsidy to subsidize thedevelopment ofAlternate Energy Sources


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The Next Boom

y The market for energyis huge- worth $6 trilliona year.

y Scale,nondisruptivenature ofalternatives anadvantage.

y The worldsventurecapitalists think Energyas thenext boom.

y Companieslike GE, BP, Shell taking renewedinterestinenergy.

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Is oil price a function of Supply and

Demand?

y Worlds production hasgrownsluggishly


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Reasons for slow Production

Increasingnationalism on the part of oil-rich countries

Disruptionsinsupplydue to militancy, bad weatherand political unrest

Growing mismatch between the type of oil beingproducedand the refineries that must processit.

Cost ofdevelopingnew oilfields risen by 110%.


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Demand for oily Growth indemandled bydevelopingnations


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Elasticity of Oil

y Both Demandand Supply of oilareInelasticin the

short runy Oilconsumptionin the OECD dropped by only 2-9%

when the pricedoubled.

y Oil productionincountriesoutside OPEC grew by

only 4% every time the pricedoubled


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Are Speculators the culprits?y No correlation betweenincreasedspeculationand

higher pricesincommodities markets.

y Despite flow ofinvestment innickel,its price hasfallen by half over the past year.

y Also, prices ofcommoditieslikecadmium ,not tradedonanyexchange, therefore much harder for

speculators to invest in, have risen faster than oil.


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If the price of petrol stands at Rs 58.90, the break up ofcost as calculated by the Indian Government is as

follows: Basic Price: Rs 28.93 Education Tax: Rs 0.43 Dealer commission: Rs 1.05

Excise duty: Rs 14.35 VAT: Rs 5.5 Petrol Custom: Rs 1.54 Crude Oil Custom duty: Rs 1.1 Transportation Charge: Rs 6.00

Total price: Rs 58.90

We can say that the thumb rule for India would be aboutRs 6 increase in the petrol prices at the station for every10 $ increase in the price of crude oil.


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y Domesticoil productionwasaround 7.6mn barrels perday (b/d)in 2001 andaveragedanestimated 8.0mnb/din 2010. It isset to increase to 8.2mn b/d by 2015.

y Similarly, Domesticoil use of 20.6mn b/din 2001reachedanestimated 26.4mn b/din 2010 andisforecast to rise to around 29.6mn b/d by 2015.Indiais

the worlds fifth biggest energyconsumer and theneediscontinuouslygrowing.

DEMAND & SUPPLY in INDIA


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THANK YOUTHANK YOU

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Future of Oil (1)