crude oil prices final

8/8/2019 Crude Oil Prices Final

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CRUDE OIL PRICING- INDIA AND GLOBAL

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Presented By:

Arun Lekhwani :07Kaustubh Tarte :18Namratha Shetty :s26Piyush Bansal :31Ratnesh Singh :36

Srishti Vaishnav :48


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AGENDA

HISTORY

GENERAL

THE ECONOMICS OF OIL

INDIAN CRUDE OIL MARKET

OPEC SHARE OF WORLD CRUDE OIL RESERVES

OIL PRODUCERS AND CONSUMERS

OIL PRICE VOLATILITY

IMPACT OF OIL PRICES ON GLOBAL AND INDIAN ECONOMY

WHY PRIVATE PLAYERS SHUT DOWN THEIR RETAIL PUMPS ?

RECENT FUEL REFORM OF INDIA

FUTURE TRENDS IN OIL PRICES2


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The presence of oil was first discovered in China in the 3rd century.

The crude oil was used for the lighting purposes in Ancient Persia.

Oil had a limited use until in 19th century.

After that the production of oil became commercialized and it started an era ofestablishment of oil refineries throughout the world.

In 1889, the presence of oil in India was discovered in Digboi in Assam. Firstcrude oil refinery in India was set up in Digboi in1901.

In 1958 and 1974, two more places for crude oil production were identifiednamely Cambay onshore basin and Bombay offshore basin.

The largest crude oil producing oilfield is the Mumbai high field that producesaround 260000 barrels per day.

HISTORY


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Crude Oil are classified according to:

Geographical locations

Sulphur level

Density of oil (API gravity)

Major Crude Oil producing countries:Saudi Arabia

Iran

Venezuela

UAE

Kuwait

Nigeria

Russia

China

GENERAL


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THE ECONOMICS OF OIL

Pr

ice

Quantity

Demand Demand Demand

Supply Supply

Quantity Quantity

Pr

ice

Pr

ice

Oil Supply and Demand

Both demand and supplyare highly inelastic. Small changes to supply ordemand curve cause largechanges to the price.

Supply

The Oil shocks

Drastic reduction in supply. Rapid rise in price. Oil shocks of 1970s , oilshocks of gulf war.

Ever Increasing Demand

Rise of emerging markets. Increase in demand for oilin China and India.

Politics , Expectation , Risks and Speculation effect demand

and supply of oil.

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India is one of the non-OPEC countries much dependent on its imports tofulfil the domestic consumption demand as it has a much lower level of

production.

The country has much depended on coal to satisfy its energy needs in theearlier times but the use of crude oil and gas is taking over the dominanceof coal with the change in time.

India has around 5.4 billion barrels of oil reserves with it.

The domestic production has increased in the recent past to reach the 0.8million barrels per day mark.

Regarding the consumption pattern of oil in India, it is the 6th largestconsumer country and 9th position among the largest importers of theworld having a consumption of 2.2 million barrels per day.

As of now, 70% of the consumption is met through imports.



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India generally imports Oman-Dubai sour grade crude, Brentdated sweet crude and Bonny light crude.

The countries from which India imports crude oil are Venezuela,Nigeria, Sudan, Iran, Kuwait.

The major units pertaining to the oil sector in India are: Indian Oil Corporation (Public sector)

Oil and Natural Gas Corporation (Public sector)

Reliance India Ltd (Private sector)

Essar Oil Refinery (Private sector)

Bharat Petroleum Corporation Ltd (Public sector) Hindustan Petroleum Corporation Ltd (Public sector)

Mangalore Refineries and Petrochemicals Ltd (Public sector)



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In contrast, India consumes two-thirdsmore oilthan its produces.America consumes a third more thandomesticoil production.Although rich in natural resources,

Brazils oilconsumption outpaces its fuel

OIL PRODUCERS AND CONSUMERS

Russia produces about 240% more oilthan itconsumes.Mexicos oil production was 39%greater thandomestic consumptionCanada output 35% more oil than it

used.China generated about 16% more oil

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OIL PRICE VOLATILITY

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Strongdemand

OPEC output Attacks in Mexico

Tensions in Turkey , Iran USD depreciation

Jan 2 ,2008 - $ 100 May 09 , 2008 - $125 June 26 ,2008 - $ 140July 11 ,2008 - $147.27

Recession


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IMPACT OF OIL PRICES ON GLOBAL ECONOMY

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Impact variables :1. Import dependency

2. Oil Intensity

Macro economic factors indicating impact -1. GDP [ Decreases ]2. Inflation [ Increases ]3. Un-employment rate [ Increases ]

International capital market valuations of equity and debt in oil-importingcountries

would be revised downwards and those in oil-exporting countriesupwards.

Importing countries creditworthiness [ Decrease ] leads to large currentaccount deficits.

Upward pressure on interest rates due to tighter monetary policies forinflation Rise in value of USD. Stronger dollar greater economic damage to


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IMPACT OF OIL PRICES ON INDIAN ECONOMY

When Oil Prices Move Up :

GDP is effected negatively.

Inflation increases.

Government spending on subsidy increases.

Exports become weak.

Foreign currency reserve deplete.

Share market crumbles.

Investment decreases.

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WHY PRIVATE PLAYERS SHUT DOWN THEIR RETAIL PUMPS ???

Private players are unable to match the fuel

price offered by state-run retailers, who getcompensated by the Government for selling fuelbelow the cost.

They suffered huge losses despite selling petroland diesel at prices higher than the state-run

retailers Indian Oil, Hindustan Petroleum andBharat Petroleum.

In spite of keeping the difference in selling priceof 4-5 rupees, private players still lost Rs 3.4 alitre on petrol and Rs 5.8 per litre on diesel as

they have not been compensated.

On the other hand ppublic sector retailers toolose Rs 10.93 on sale of every litre of petrol andRs 14.66 per litre on diesel but the losses aremade up by issue of oil bonds by the Government

and discounts from ONGC, GAIL and Oil India. 16


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RECENT FUEL REFORM OF INDIA

Indian fuel reform freeing retailers to set petrol prices and lifting prices

of other products.

In the short term, it will definitely hit the pockets of the people as thepetrol prices surged by approximately 10%.

In the long term it will ease the subsidy burden of government.

This reform will help the private sector oil companies like Reliance andEssar which had almost 15 percent of the retail fuel market five years ago,before subsidised state firms nearly squeezed them out.

Due to this reform, Reliance plans to reopen all of its fuel stations in the

country and will sell petrol and diesel at the same rates as state firms.

The government plans to free diesel prices also, but the deputychairman of the Planning Commission said in an interview the governmentwould set diesel rates for the next few months.

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FUTURE TRENDS IN OIL PRICES

18Price to stabilize around $90 per barrel.


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THANK

YOU19

crude oil prices final

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