1. CRUDE OIL, GOLD PRICE,
DOLLAR PRICE
SUBMITTED BY:
MANPREET KAUR
GAVESHNA
PALAVI
SHIVANI GOEL
RAHUL RAJ

2. CRUDE OIL

3. 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) (<1%)

5. 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 is
conformation of assymetrical behaviour of low cost petroleum
supplier i.e. the country restrictes production in reaction to
negative demand shocks, but does not expand production in
response to positive ones.

6. TOP 5 OIL PRODUCING COUNTRIES
MILLION OF BARREL PER DAY
12
10
8
SAUDI ARABIA
6 RUSSIA
UNITED STATES
4
IRAN
2 MEXICO
0
SAUDI RUSSIA UNITED IRAN MEXICO
ARABIA STATES

7. TOP 5 CONSUMER OF WORLD
MILLION OF BARRELS PER DAY
25
20
15 UNITED STATES
CHINA
10 NORWAY
IRAN
5
UNITED STATES
0
UNITED CHINA NORWAY IRAN UNITED
STATES STATES

8. Supply of crude oil
• Oil production is not labour intensive and
therefore oil supply can be controlled easily by
reducing 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

9. • Gulf countries have lowest production cost
i.e. USD 4-5 per barrel as compare to the
north sea and brazil where production cost
is about USD 9-13 per barrel
• Top 5 oil exporting countries

10. TOP 5 OIL EXPORTING COUNTRIES
MILLION OF BARRELS PER DAY
10
9
8
7
6 SAUDI ARABIA
5 RUSSIA
4 NORWAY
3 IRAN
2
UAE
1
0
SAUDI RUSSIA NORWAY IRAN UAE
ARABIA

11. Demand side of crude oil
Demand of oil depends upon various factor
 Demand of individual household and firms
 Oil’s importance for the economy and national
security

12. TOP 5 IMPORTERS OF WORLD
MILLION OF BARRELS PER DAY
14
12
10
8 UNITED STATES
JAPAN
6 CHINA
4 GERMANY
SOUTH KOREA
2
0
UNITED JAPAN CHINA GERMANY SOUTH
STATES KOREA

13. IMPACT OF CRUDE OIL PRICES ON
WORLD ECONOMY
•It is estimated that 100 USD oil
would reduce the economic growth
by 0.2-0.3%.
•The global economy would not be affected as
much because emerging economies consume
less oil, than industrialized countries do.
•Many developing countries subsidize the cost
of gas.

14. IMPACT OF CRUDE OIL PRICES ON
INDIAN ECONOMY
• India’s crude oil import bill may
cross 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 passes
it to consumer by increasing prices of
petroleum products.

15. • India’s 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.

16. CRUDE OIL RISE CAN HAMPER
GLOBAL RECOVERY
•IMF (International Monetary
Fund) has warned that rising
prices of scarce natural resources
could aggravate poverty.
•Just as the US & global economies are finally
strengthening, they face a new danger:
Rocketing oil prices, which topped 120 USD a
barrel.

17. •The main factors that would be responsible
for economic growth moderation in 2011-12
would be crude oil(CO) prices & RBI’s
tightening of monetary policy in response to oil
prices.
•Rising crude prices will lead higher inflation &
higher inflation attracts monetary tightening.

18. •Rising oil prices could threaten the European
economy which are net importers of oil &
gas, haven’t recovered fully from financial
crisis & face heavy debt loads.
•Rising oil prices would push up inflation in
Europe, where it already exceeds official
targets.

20. GOLD
Gold is a dense, soft, shiny, malleable and
ductile metal.
Gold has been a valuable and highly precious
metal for coinage, jewelry & other arts since
long before.

21. 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%

22. GOLD PRICES IN INDIA
CITIES GOLD (10g)(Rs)
Chennai 26700.00
Mumbai 26590.00
Delhi 26980.00
Calcutta 27040.00

23. 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?

24. 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 uncertainty
about economic prospect or in financial market, eg.
American & European debt crisis lead to increase in
demand for gold.

25. 2) Investors buy gold to protect themselves
from currency debasement.
We can interpret the rise in gold prices
mean that investors expect future inflation
to be high.
Rising gold prices mean that investors are
fearful about economic aspect & about
excess inflation.

26. 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 doesn’t
create output or employment Whereas
money invested in businesses in economy
would do so. Thus investment for gold is
negative for economic growth.

27. 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.

28. US DOLLAR STRENGTH,WEAKNESS &
PRICE OF GOLD.
•When the USD gets stronger, it takes few dollar
to buy gold ie. priced in $USD. When the USD
get weak then it takes more dollar to purchase
gold.
•CHANGE IN THE PRICE OF GOLD IS REALLY A
REFLECTION OF A CHANGE IN THE VALUE OF $US
DOLLAR.
•WHEN THE DOLLAR GETS STRONG THEN GOLD
APPEARS TO GO DOWN & VICE VERSA.

29. GOLD & DOLLAR GRAPH

30. GOLD PRICE FLUCTUATIONS IN
RECENT YEARS
•In March 2008, the gold price exceeded
US$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.

31. •Pricing soon resumed on upward momentum
by temporarily breaking the US$1000 barrier
again in late February 2009 but regressed
moderately later in the quarter.
•Later in 2009, the March 2008 intra-day spot
price record of US$1,033.90 was broken several
times in October, as the price of gold entered
parabolic stages of successively new highs when
a spike to $1226 of the price to the mid-
October levels.

32. •On August 22, 2011 gold reached a new
record high of $1908.00 at the London
Gold Fixing.

33. • Economic growth is fairly strong in India as
compare to rest of the world.
It is growing at a slower rate but still above 7%.
So India doesn’t face the same debt problem
that western country faced.
•RBI has been raising interest rate & tightening
monetary policy. So to reduce inflation RBI is
reducing the rupee in circulation.

34. DOLLARS

35. ABOUT DOLLAR
• United States dollar sign: $; code: USD; also abbreviated
US$), also referred to as the American dollar, is the official
currency 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 international
markets 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 is
held in significant quantities by many governments and
institutions as part of their foreign exchange reserves).

36. FACTORS AFFECTING VALUE OF US
DOLLAR
SUPPLY & DEMAND- These are decreed by
international trade between countries.
When dollar traders from other nations pay
for our product and services in dollars after
converting their currencies into dollar, when
this done demand for dollar is created.

37. 1) BALANCE OF TRADE – Also known as
current account balance.
The balance of trait represents the difference
between exports & imports in terms of goods
& services.
If exports exceed import in either current
account, it is called surplus.
If imports exceed export then it is called
deficit.

38. The US has been running a trade deficit with the
rest of world in recent times. This makes the
foreign investors increasingly nervous & can
affect the dollar significantly.
2) FALLING PRICES ON FOREIGN GOODS – When
the prices for foreign goods decreased they
become more attractive for American consumer
& create a trade deficit.
When there is rise in price of foreign goods
because of increase in demand can make the
American goods more attractive & narrow the
trade deficit. This increases the value of dollar.

39. 3) BALANCE OF INVESTMENT – When the US
imports more then it exports so investors
from 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 goes
down & the dollar goes up.

40. 6) PRESIDENT POPULARITY – Popularity of the
US president id tied to value of US dollars.
7) TERRORIST ATTACK & WAR- Attacks damage
consumer & business confidence hampers the
economic growth.
8) CONSISTANT POLICIES- If investor feel that
things will remain same they will flop to dollar
because it is safe. This increases the demand
thus increases the value of dollar.

41. 9) GOVERNMENT EXPANSION- New
departments & increase govt functions cost
money. Like other govt expenses expanding
new groups like TSA & department of
homeland security can lower the dollar value
due to their opportunity cost against other
expenses in the budget.

42. RELATIONSHIP BETWEEN CRUDE
OIL, US DOLLAR AND GOLD PRICE
• Gold is the real currency while dollar is only the
representative hence the trend is people tend to
favor gold to dollar when there is high inflation
and diminishing dollar and vice versa
• in short term there is no any clear cut cause and
effect relation BUT A LONG term trend analysis
shows negative correlation between gold prices
and the value of dollar but gold price does not
increase proportionately to the diminishing
dollar.

43. • QUE - If there is RISE OR FALL in US dollar then what
will happen to GOLD PRICE RISE OR FALL???
ANS - If the US dollar falls, Gold will remain the same
for 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 is
because crude oil is primarily traded in U.S. dollars

44. •
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

45. FIVE YEAR TREND OF CRUDE OIL

46. FIVE YEAR TREND OF GOLD

47. CONCLUSION
• GOLD AND CRUDE OIL HAVE POSITIVE
RELATIONSHIP
• US DOLLAR AND GOLD HAVE NEGATIVE
RELATIONSHIP
• US DOLLAR AND CRUDE OIL HAVE NEGATIVE
RELATIONSHIP

48. THANK YOU