DECREAMENT IN OIL
PRICEGroup member
1.Purnendra Shrivastava 14202118
2.Divya Shree Bharti 14202100
3.Debarati Bhattacharya 14202108
4.Sukhbir singh 14202085
5.Anurag oliver 14202077
6.Ankita singh 14202093
CONTENT
INTRODUCTION
IMPORTENCY OF OIL IN OUR DAILY LIFE
CAUSE OF OIL PRICE VARIATION
CAUSE AND EFFECT OF OIL PRICE VARIATION IN HUMAN LIFE
EFFECTS OF OIL PRICE DECREASING
CONTRIBUTION OF INDIA AND OTHER COUNTRIES ON OIL PRICE REDUCTION
FEW FACTS AND FIGURES
CONCLUSIONS
INTRODUCTION
1) With each passing year, oil seems to play an even greater role in the global economy. In the
early days, finding oil during a drill was considered somewhat of a nuisance as the intended
treasures were normally water or salt.
2) 1857 that the first commercial oil well was drilled in Romania. The U.S. petroleum industry
was born two years later with an intentional drilling.
While much of the early demand for oil was for kerosene and oil lamps, it wasn't until 1901 that
the first commercial well capable of mass production was drilled at a site known as Spindle top
in south-eastern Texas.
This site produced more than 10,000 barrels of oil per day, more than all the other oil-producing
wells in the U.S. combined. Many would argue that the modern oil era was born that day in
1901, as oil was soon to replace coal as the world's primary fuel source.
Oil's use in fuels continues to be the primary factor in making it a high-demand commodity
around the globe
CONTINU…….
The two primary factors that impact the price of oil are:
supply and demand
market sentiment
The concept of supply and demand is fairly straightforward. As demand increases (or supply decreases) the price
should go up. As demand decreases (or supply increases) the price should go down.
Price Cycle
Additionally, from a historical perspective, there appears to be a possible 29-year cycle that governs the behaviour of
commodity prices in general. Since the beginning of oil's rise as a high-demand commodity in the early 1900s.
IMPORTENCY IN OUR DAILY LIFE
Oil is the key ingredient for global energy needs and will continue to power worldwide
industrial and commercial expansion.
It is also used in a wide variety ways such as cooking, heating, waterproofing and in
numerous consumer products including skin treatments.
It has proven to be a versatile commodity and exceedingly integral to our way of life,
bordering on an absolute necessity.
Oil and gas are used widely in modern life.
Oil fuels the cars, trucks and planes that underpin modern economies and lifestyles.
By-products from oil refining are used in the production of plastics and chemicals, as well as
many lubricants, waxes, tars and asphalts. Nearly all pesticides and many fertilisers are made from
oil or oil by products.
Gas provides electricity and is also used for cooking, heating houses and buildings, and
heating water.
It is also important for fuelling many industrial operations, including glass and steel
foundries, aluminium or nickel smelters, and many manufacturing industries. Gas is used in
producing fertilisers and a wide range of industrial products, including plastics and
polymers, textiles and paints and dyes.
It can also be used in the form of compressed natural gas (CNG) or liquefied natural gas
(LNG) as a transportation fuel.
Continue….
CAUSE OF OIL PRISE VARIATION
Crude oil is one of the most basic global commodities . Fluctuation in the crude oil prices has both direct
and indirect impact on the global economy .
Crude oil prices have gone up to record levels of USD 125 per bbl (rise of around 70 percent from previous
year's levels).
The price variation in crude oil impacts the sentiments and hence the volatility in stock markets all over the
world. The rise in crude oil prices is not good for the global economy.
Price rise in crude oil virtually impacts industries and businesses across the board.
Higher crude oil prices mean higher energy prices, which can cause a ripple effect on virtually all business
aspects that are dependent on energy (directly or indirectly).
Higher and volatile food prices and poor rural people
Boosting household food security.
Increasing sustainable and resilient production.
Strengthening the market integration of small farmers.
Improving risk management.
High oil prices don’t go away, except in recession.
Salaries don’t increase to offset rising oil prices.
Spikes in oil prices tend to be associated with recessions.
High oil prices don’t “recycle” well through the economy.
Housing prices are adversely affected by high oil prices.
CAUSE AND EFFECT OF OIL PRICE VARIATION IN HUMAN LIFE
The impact of decline in oil prices doesn’t “go away”.
Government finances are especially affected by fall in oil prices.
Lower oil prices reflect a need to focus a disproportionate share of investment and resource use inside the oil
sector. This makes it increasingly difficult maintain growth within the oil sector, and acts to reduce growth rates
outside the oil sector.
Business profitability is adversely affected by decline in oil prices.
CONTINUE…..
• Impact on oil consumers- Lower oil prices help to reduce the cost of living. Oil related
transport costs will directly fall, leading to lower cost of living and a lower inflation
rate.
• Impact on oil exporters-For oil exporters a falling oil price is bad news. Many oil
exporting countries rely on tax revenue from oil production to fund government
spending.
• Other economic impacts of lower oil prices-Falling oil prices could delay investment
into alternative ‘greener’ forms of energy, such as electric cars
• Falling oil prices could reverse the recent decline in car use, leading to a steady
increase in traffic congestion and environmental costs of petrol use.
• Control inflation as it has a direct effect on inflation.
• Lower oil prices will help in the management of India’s current account deficit(CAD)
• The scope for elimination of diesel subsidy.
Positive impact on India of price fall in oil
Pressure on Oil Economies
The falling price of oil creates varying degrees of financial difficulties for countries that rely
heavily on its export. According to research by Deutsche Bank, the point at which their
national budgets break even varies from about $125 a barrel for Iran to less than $75 for
Kuwait.
Economic growth concerns fuel fears.
Dragging oil demand may continue longer than many economists would like as global
economies struggle to post strong recoveries, and some nations, such as Japan, substitute oil for
natural gas and alternative fuel sources.
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