The impact of lower crude oil prices Oil prices have slid to $68 per barrel.India being a major crude importer will benefit from this slide. The following are the impact of lower crude oil prices in the various sectors in a country like India. Positives It will help in reducing the CAD. Help in saving dollars and thereby improve foreign reserves. Help in raising the GDP. Lower oil prices will help in reducing inflation. Help in stabilizing the Rupee and thereby help both exporters and importers due to price stability. Reduce the subsidy burden.This period will provide a sweet coating for the bitter pill, as the pinch of subsidy reduction will not be felt by the public. Oil marketing companies like IOC, HPCL, BPCL will benefit due to reduced subsidy burden and profit out of sales. Automobile industry will be benefited due to increased demand coupled with signs of economic recovery. Tyre manufacturers will be benefited as price of artificial rubber,whose major ingredient is oil,will come down.Natural rubber prices also will take a beating. Airlines can get a breather as ATF cost about 40% of operating cost. Power generation industry will enjoy benefit due to lower LNG and coal prices. Industries which depend on oil like plastics,artificial rubber(footwear) will be benefited. Negatives Lower oil prices will drive higher the consumption,which will increase pollution and associated global warming. People would prefer private transport over public transport which will cause strain in the already stretched infrastructure. Oil exploration is cost intensive.Lower oil prices will deter prospectors to carry out new drilling.Oil producing companies which would have invested heavily will be affected due to low prices. As lower oil prices translates to lower artificial rubber prices, natural rubber prices will take a hit.This will affect rubber plantations in Kerela and Kanyakumari district of Tamilnadu as rubber plantation is a major economic activity.The rubber planters have to suffer two fold as there is higher supply of natural rubber from rubber exporting countries like Thailand and Malaysia. Renewable energy production like solar will suffer due to higher price differential.
Posted on: Mon, 08 Dec 2014 09:27:28 +0000
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