Published on May 1, 2014

Crude oil which noted as one of the most basic global commodities and surplus any other energy sources it provides more than a third of energy which is mostly used every day in India. Both direct and indirect impact on the global economy is seen due to ebb and flow in crude oil prices and as result investors over the world have closely tracked the prices of crude oil. In volatility of oil prices the performances of crude oil prices have received a special attention in the current environment of swift rises and augmentation.

As per industry experts, it is widely believed that slow economic growth, inflationary pressures and global imbalance are caused due to soaring oil prices, moreover, volatile oil prices might also raise vagueness and much need investment in oil sector could be discouraged. Moreover, fears about oil scarcities have been raised owing to high oil prices and tight market conditions. According to industry experts, variation in crude oil prices direct or indirectly impacts the sentiments and causes volatility in stock markets, also affects the industries and business across the board.

Due to global economic weakness as well as more fuel-efficient technologies the growth in oil demand has been projected to remain moderate and supplies are expected to get a boost from shale gas and oil, also deep and ultra-deep drilling operations. However in the next 5 to 7 years the world is prone to have a stable pricing regime in the crude oil, moreover to utilize this period India needs to ensure unwavering and long-term energy security.

Organisation of Petroleum Exporting Countries (OPEC) produces a large part of crude oil share to the world and an immediate impact is seen in the prices of crude oil in the global commodity markets due any decisions made by OPEC countries to raise the prices or reduce production. In the recent past, many events such as hurricane hitting the oil production areas in US have been seen driving volatility in crude oil prices in the global markets. 

According to a research, by the year 2020 India is set to become the major driver of global oil demand and for this reason a wide-ranging energy policy is needed to India, which will determine on how the rising domestic demand for energy will meet in the average to long term at reasonable price and without any disruption risks.

For the immediate future needs crude oil producers and consumers have build a storage capacity to store crude oil and in case of any unexpected changes in supply and demand equations the producer and consumers have also build a few inventories to speculate on the price outlook and sale arbitrage opportunities. Moreover, with the rise and fall in the stock markets can in turn create instability in the prices of crude oil, if any kind of change is made in these inventory levels.

As a result of high growth and demand from the budding economies, the demand of crude oil is sharply getting higher and on the supply side, in compare to the last decades the major sources of supplies are still the same and is one of the factors which is pressurizing the prices of crude oil to follow upward trend. Among the non-OECD (the Organisation of Economic Co-operation and Development) countries (made up of the US, most of Europe, Japan and other advanced countries) for the last decades, countries such as China, Saudi Arabia and India together have the largest growth in crude consumption.

However, to diminish imports from 80% to 40% in India, the government is drawing up a blueprint on hoisting autonomy in petroleum products.