Oil prices since May 2014

Presented By:•Arti Tiwari•Madhavi Wadurkar•Jayesh Dandekar•Rahul Gaikwad

Submitted to : Prof. ANAND SHRINGARPURE

Contents What is Crude Oil & Price of oil?

What sets Oil prices?

Trend of Crude oil Price in 2014

Reasons of changing oil prices

Impacts of changing oil prices

Benefits of falling oil prices for India

Future of Oil

Conclusion

What is Oil & Price of oil

Naturally-occurring substance/black stuff

Made up of carbon, hydrogen and sulfur, originates from the remains of

animals and plants that existed millions of years ago

Refine it in order to produce energy

The price of oil generally refers to the spot price of a barrel of benchmark

crude oil.

June 2014, the price of crude oil was up around $115 per barrel. As of

January 23, 2015, it had fallen by more than half, down to $49 per barrel

What sets Oil prices?

Demand & Supply

Consumption

Financial markets

Government policies

Trend of Crude oil Price in 2014Month Price Change

Jan-14 102.3 -3.07%

Feb-14 104.8 2.51%

Mar-14 104 -0.74%

Apr-14 104.9 0.87%

May-14 105.7 0.75%

Jun-14 108.4 2.50%

Jul-14 105.2 -2.91%

Aug-14 100.1 -4.91%

Sep-14 95.89 -4.16%

Oct-14 86.13 -10.18%

Nov-14 76.96 -10.65%

Dec-14 53.60 -30.35%

Jan-15 48.24 -10.00%

Trend of Crude oil Price in 2014

Reasons of changing oil prices Current oil prices, driven down to historic lows as a result of oversupply from

the US shale market,

Decreased demand from large consumers such as China

OPEC's controversial move to preserve market share by not cutting supplies

While the Libyan supply of light crude had been taken out of world markets for a while, the following geopolitical events have kept oil markets on edge:

Insurgency in Iraq – Islamic State in Iraq and Syria (or ISIS) threat to supplies from giant oil fields

Ukraine conflict involving Russia – a major supplier of energy to the world

Israel-Gaza conflict – a region that is home to the world’s largest crude oil deposits and supplies

Possibilities that there is an international political conspiracy behind the collapse of oil prices? (Not sure)

Impacts of changing oil prices Sectors will have a positive impact  directly as well as indirectly

Automobiles

Plastic industries including pipes

Chemicals and resins selectively,

Paints

Footwear manufacturers etc. 

Sectors will have negative impact

Oil

Gas companies.

These companies will feel a mixed effect. On the positive side, a lower oil price means a lower subsidy burden.

Continued..

Impacts of changing oil prices Oil Producing Countries:

Oil at lower levels is a dampener for the world economy because the multiplier effect of high oil on the economies that produce oil is far greater than the benefit of cost saving to oil consuming economies.

Low oil prices are a problem for oil producers like Russia and Venezuela which are in turmoil and their economies are in deep trouble with GDP degrowth of up to 5% expected. 

Saudi Arabia and the middle-east producers will probably see sizeable deficit in revenues from oil, which could drain their forex reserves substantially. 

Oil Importing Countries:

Large oil consumers such as US, China, Japan and India have substantial savings in oil spend.

Benefits of falling oil prices for India

The scope for elimination of diesel subsidy Assuming the rupee stays stable, the government has a golden opportunity to

market-link diesel prices Falling fuel prices have a direct effect on inflation, whereas indirectly they

lower production costs for firms with petroleum-based primary input Lower oil prices help in the management of India’s current account deficit

(CAD) Falling oil should provide a more conducive environment and more elbow

room for this new government to initiate bolder reforms

Continued..

Benefits of falling oil prices for India Foreign institutional investors have pumped in more than 260

billion rupees into the Indian equity markets over the past three months

Global liquidity has impacted Indian economy attracted liquidity and valuations shot up

the most obvious effects of falling oil prices is that it brings down inflation and exerts a downward pressure on inflation expectations.

Future of Oil The shale and fracking induced boom in the U.S. has pushed

crude oil production to a 27-year high. Indeed, U.S. dependence on petroleum imports has decreased by half since 2005

Alternative technology which could replace Oil has been announced by USA and might be made available to the world market in future

ConclusionWhen Oil prices Moves DOWN :

Inflation Decreases

Govt. spending on subsidy decreases

For producing countries export

becomes weaker

GDP is affected positively

Share market crumbles

Investment increases