oil industry presentation

7/29/2019 Oil Industry Presentation

1/22

Oil IndustryGlobal Business Dynamics Project

Team Members

Chinmay

Gulshan

Sanjay

Swapnil

Vaibhav


2/22

Agenda

1. Countries Consumptions and history

2. Supply of oil through OPEC & Non OPEC countries

3. Price & Output (stock) fluctuations.

4. Dollar , Gold and Oil correlation

5. Price impact on retail user in the Indian context

6. World prices affecting BOP of India.


3/22

BLACK GOLD .OIL

Oil , Black Gold has fascinated humankind for long.

Played a significant role in the growth of civilization and influence of social development.

History of Oil began over 5000 years ago in the form of Crude Oil.

The current era started in August 1859 when first oil well was drilled by Edwin L Drake inPennsylvania.

Today without Oil, mans ability to adapt to the dynamics of life will be almost nothing.

It is estimated that 40% of the worlds total primary energy demand is fulfilled by oil.


4/22

WORLD OIL RESERVES

As per estimations, the world contains 4 Trillion barrels and approximately half of its

recoverable.

World has already consumed 465 billion barrels and by current rate of 22 billions/year

the world has about 40 years left to enjoy the luxuries of Oil.

Biggest Reserves are with Saudi Arabia 23.5% , Iraq 9.5%, Kuwait 8.5%, UAE 9%, Iran 9%,

Libya 4.5%, Nigeria 3.5%, Qatar 2.5%, Venezuela 7%, Mexico 5%, Canada 5%, Southeast

Asia 5% and Central Asia 5%.


5/22

WORLD OIL CONSUMPTION

The world increased its daily oil consumption from 63 million barrels (10,000,000 m3) (Mbbl)

in 1980 to 85 million barrels (13,500,000 m3) in 2006

Between 1995 and 2005, U.S. consumption grew from 17,700,000 bpd to 20,700,000 bpd.

Chinas consumption increased from 3,400,000 bpd in 1995 to 7,000,000 bpd in 2006.

Indiasconsumption increased from 1,200,000 bpd in 1995 to 3,100,000 bpd in 2006.


6/22

INDIAS OIL CONSUMPTION

Indias economy is expected to grow at a

rate of 7% per annum over the next five

years, meaning its demand for energy will

also increase.

Indias domestic oil production, though,

only covers around 22% of consumption

and this share will probably drop in the

coming years

India is likely to become in the next five

years more dependent on oil imports.

Major part of Oil requirement is for the

Automotive Sector


7/22

OPEC

The Organization of the Petroleum Exporting Countries (OPEC) is a permanent,

intergovernmental Organization, created at the Baghdad Conference on September 1014,

1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Present HQs at Vienna.

Present Members:

Algeria Libya

Angola Nigeria

Ecuador QatarIran Saudi Arabia

Iraq United Arab Emirates

Kuwait Venezuela

The mission of the Organization of the Petroleum Exporting Countries (OPEC) is to coordinate

and unify the petroleum policies of its Member Countries and ensure the stabilization of oil

markets in order to secure an efficient, economic and regular supply of petroleum to

consumers, a steady income to producers and a fair return on capital for those investing in the

petroleum industry.


8/22

OPEC produces only an agreed quota of Oil to keep prices moderate and profits good.

Though presently OPEC does not have high influence in OIL economy because new reserves

discovered.


9/22

INDIAS OIL Production and Imports

INDIAS Dependence on OPEC


10/22

Price and Output Fluctuations


11/22


Impact Of Geopolitical events

Demand Supply factors

Demand factors

1) Cyclical demand

2) Prices of substitutes

Supply factors1) Profit motive

2) Spare capacity

Production shocks

Peak oil factor and declining production

Speculation


12/22



13/22

Dollar, Oil and Gold Correlation


14/22

Imported Items likeoil, gold cost more

dollars

Items India Exports

earn more dollars

Increase in Trade

Deficit

(Export - Imports)

Hits the currency value of the country

Affects the money circulations in the economy

INFLATION

Dollar Weakens against the rupee

Increase in import bill

Higher Trade Deficit

Oil, gold and commodities have traditionallybeen priced in US dollars since 1970s when

OPEC decided to sell its oil exclusively for

US dollars.

What if Dollar looses value?



15/22

An increase in oil price results in increasing inflation,negatively impacting the economy of any country .

Gold is a traditional inflation hedge.

Countries have got Foreign Reserves and these

reserves are in form of Dollars.

India boasts about 140 Billion Dollars of reserves.



16/22

Last Decade Analysis


17/22

Price impact on Retail user in the Indian Context

i i il i h di


18/22

Price impact on Retail user in the Indian Context

Prices of essentials like kerosene, LPG & diesel are regulated and subsidized.

India has shown significant elasticity of petrol consumption vs. petrol prices.

India's oil consumption as a % of GDP is 6.5% & we import 3/4 of our oil requirement.

India spent USD 79.55 billion on oil import last year

Every 10% increase in oil prices reduces our GDP growth by 0.47 bps

With rising oil prices, Government acts as a buffer, the oil subsidy bill further increases fiscal

deficit

This directly increases inflation

Higher Inflation attracts monetary tightening by RBI

Thus through Inflation, oil prices have a cascading effect on Indian consumers


19/22

World OIL price affecting Indias BOP


20/22

World Crude Prices affecting Indias BOP

Increase of US$1/bbl increases import bill by US $700mn.

Widening of Current Account Deficit. ($43.9 billion as on Sep 2011)

Issue of Bonds by the Indian Government.

High Inflation rate.

Weakening of the Indian Rupee.

Imports becomes more expensive & exports less valuable.

Drop in real national income.

Increase governments budget deficit.


21/22

Conclusion

Crude oil - Lifeline to the world's economy.

Increased oil prices have definite impact on world economy.

Formulate policies to bring alternative energies into the market.

Encourage the producers by providing carbon free energy credit.


22/22

oil industry presentation

Documents