Oil Crisis - Who Slipped and Who Stands?

Abstract

Crude oil is the most important natural resource of the industrialized nations. It can generate heat, drive machinery, fuel vehicles and airplanes. The oil producing nations, with their history of booms and busts, are in the deepest downturn since the 1990s, if not earlier. They have been making millions or billions of dollars from the higher prices but are now finding themselves in trouble. One of the main reasons behind this changing oil prices is fall in demand of oil in the international market. United States domestic production has nearly doubled over the last several years, pushing out oil imports that need to find another home. Saudi, Nigerian and Algerian oil that once was sold in the United States is suddenly competing for Asian markets, and the producers are forced to drop prices. Also with the emerging technologies vehicles are becoming more energy-efficient. So, demand for fuel is lagging. The high price of oil is partly to blame. And because of the steep oil price, many countries have decided to save oil by using less of it. The result is that today the world is awash with oil simply because the demand for it has gone down. Its impact can be seen in all the major economies of the world as well as on the major industries and stock markets. It's having a great impact on Russia, the U.S., Saudi Arabia, Europe and Asian Countries. The 3 major areas of economic consequences due to fall in oil prices are-the impact on inflation, consumer spending, and auto sales. It has proved to be a boon for many countries while curse for other sectors and economies. India one of the greatest emerging economies and the major importer of crude oil have a net positive effect on the economy due to low prices of crude oil. lower oil prices will cut inflation, and bring down our Current Account Deficit but it also has its downsides. It will affect the exporters of petroleum producers in the country. The current case discusses in detail the various reasons about the recent fa ll in oil prices, factors affecting its demand and supply, impact on oil importing and exporting countries as well as on Indian economy