This ppt is of subject called Elements of Corporate Finance .
it include the information about the OPEC , reasons , some current information about crude oil and major suppliers of crude oil to india( 2015)
3. WHAT IS CRUDE OIL?
Mixture of naturally
occurring hydrocarbons
that is refined into
diesel, gasoline, heating
oil, jet fuel, kerosene,
and literally thousands of
other products called p
etro chemicals.
4. OPEC - FOUNDED IN BAGHDAD, 1960
The organization of the
Petroleum Exporting Countries
(OPEC) is a group of 12
members that include Iran, Iraq,
Kuwait, Qatar, Saudi Arabia, the
United Arab Emirates, Libya,
Algeria, Nigeria, Angola,
Venezuela and Ecuador.
Venezuela was the first country
to move towards the
establishment of OPEC by
approaching Iran, Iraq, Kuwait
& Saudi Arabia in 1949.
5. REASONS FOR CHANGE IN CRUDE OIL
PRICES IN INTERNATIONAL MARKET
Rise in crude oil prices:
Currently oil sales are traded in terms of US dollars, changes in
the value of the dollar against other world currencies affect
OPEC‟s decisions on how much oil to produce.
Falling dollar value puts pressure on oil exporting nations
Political tensions .
Rapid growth in Asian economies.
That led to large price spikes, and oil hovered around $100 per
barrel between 2011 and 2014.
6. Fall in crude oil prices:
Steadily rising supply caused oil prices to start dropping
from their June peak of $115 per barrel down to around $80
per barrel by mid-November.
That brings us to OPEC
OPEC meeting in Vienna on November 27.
SAUDI ARABIA was opposed to cutting production and
seemed willing to let prices keep dropping.
In the end, OPEC couldn't quite agree on a response and
ended up keeping production unchanged.
That caused the price of oil to start crashing even further.
One of major cause for reduction in Crude Oil prices is the
production by non OPEC Countries, such as recent
discovery of Shale Gas in US Oil Fields.
7.
8. IMPACT OF CRUDE OIL PRICE
CHANGE ON INDIAN ECONOMY
India is not self-sufficient.
The Govt’s decision to hike the prices of petrol, diesel &
LPG was inevitable.
The rate of inflation increased to 12.91% on August 2nd
2008 mainly due to increased oil prices as oil is an universal
input that directly & indirectly enters into the cost of
production of every other commodity.
India’s total oil consumption is about 2.2 million barrels per
day.
It imports more than 75% of its total oil consumption.
The transport sector consumes one –third of India’s oil
9. IF PRICE RISE THE
IMPACT WILL BE…
the exact impact of the hikes would differ in different
cities due to local levies.
Eg: According to the Times of India, the rising crude oil
price can also weighing heavy on the Indian polyester
industry.
India will have to deploy its foreign exchange reserves
to pay the higher import bills.
In such a case, a depreciating rupee and widening
current account deficit will be back on the table.
if oil prices will rise Japan, China and India would be
most at risk given their dependence on oil imports.
And thus inflation will increase.
10. IF PRICE FALLS THE
IMPACT WILL BE…
The fall in prices is largely due to subdued demand by
consumers and oversupply by some OPEC producers
A one-dollar fall in the price of oil saves the country
about 40 billion rupees.
It is kerosene and liquefied petroleum gas (LPG) that
are still heavily subsidized.
Consequently, the fiscal deficit that in 2014-15 is
projected at 4.1 percent of GDP may be somewhat
reduced.
11. First, if the average fall in oil prices is about $4 per barrel
in 2014-15, the trade deficit will shrink by about $3 billion.
In the April-June quarter, the current account deficit
had dropped to $7.5 billion, mainly due to customs duty
on gold imports.
A recent note from Macquarie Capital Securities India
Pvt. Ltd highlighted that $10 per barrel fall in oil prices
reduces the import bill and the current account deficit
by $9.2 billion (0.43% of the gross domestic product).
The reduction in oil prices will reduce the import bill for
India and have a favourable impact on the external
account.
12. The subsidy burden for the government of India will
decline significantly because of fall in crude oil prices,
which will help contain fiscal deficit.
India is also benefiting from the decline in oil prices as it
has accelerated the disinflationary process.
