Professional Documents
Culture Documents
PROJECT REPORT
ON
Award of degree of
Submitted by:
RAJA MAHESH
H.T.NO. (117619684045)
(Assistant Professor)
Hyderabad – 500062
(2019 – 2022)
DECLARATION
I, Raja Mahesh bearing the Roll no 117619684045 do hereby declare that this project
report entitled “Impact of increasing Petroleum price on customers ‘’ submitted by me
to the department of business administration of sai Sudhir degree and PG college, is a
benefited work taken by me and it is not submitted to any other university or institution for
the award any degree diploma / certificate or published any time before.
Date:
Place:
(Raja Mahesh)
ACKNOWLEDGEMNET
I take this opportunity to extend my profound thanks and deep sense of gratitude to all the
respondents of my survey for giving me the opportunity to undertake this project work.
My sincere thanks to Principal Dr Meera Naidu and my project guide MS. Sonali Walia
I would also like to acknowledge Sai-Sudhir Degree and PG College and the faculty
members who have extended their support at all the stages of my project.
I am also thankful to all those who have helped me, through there valued guidance,
co-operation and unstinted support during the course of my project.
(Raja Mahesh)
ABSTRACT
Indian economy has been facing the two major issues therefore trade
imbalances and persisting inflation. Oil constitutes one-third of the country
total imports and is consider to have wide ranging impact on its economy. this
paper empirically examines how petrol price fluctuations impact India
economy through various channels, viz. real sector, monetary policy, external
trade, exchange rate and investment. The results of cyclical correlation
analysis suggest that petrol is pro-cyclical to output, price level, stock market,
gold, intrest rate and foreign exchange reserves, while it is counter cyclical to
money supply, net exports and exchange rate. Also, it is found that petrol
granger-causes output, general price level and net exports the study
employees VAR analysis of examines variance decomposition to capture the
linear inter dependencies among the variables.
INDEX
PAGE
S.NO. CONTENT
NO.
INTRODUCTION
• Introduction
• Need of the study
• Scope of study
1–9
CHAPTER 1 • Objectives of study
• Research Methodology
• Limitations of the study
CHAPTER 5 BIBILOGRAPHY 33
CHAPTER 6 ANNEXURE 34 – 36
CHAPTER 1
INTRODUCTION
The petroleum industry, also known as the oil industry or the oil patch, includes the global
processes of exploration, extraction, refining, transportation (often by oil tankers and pipelines),
and marketing of petroleum products. The largest volume products of the industry are fuel oil
and gasoline (petrol). Petroleum is also the raw material for many chemical products, including
pharmaceuticals, solvents, fertilizers, pesticides, synthetic fragrances, and plastics. The industry
is usually divided into three major components: upstream, midstream, and downstream.
Upstream regards exploration and extraction of crude oil, midstream encompasses transportation
and storage of crude, and downstream concerns refining crude oil into various end products.
Petroleum is vital to many industries and is necessary for the maintenance of industrial
civilization in its current configuration, making it a critical concern for many nations. Oil
accounts for a large percentage of the world’s energy consumption, ranging from a low for
Europe and Asia, to a high of the Middle East.
Other geographic regions' consumption patterns are as follows: South and Central America
Africa and North America. The world consumes 36 billion barrels of oil per year, with developed
nations being the largest consumers. The United States consumed of the oil produced in The
production, distribution, refining, and retailing of petroleum taken as a whole represents the
world's largest industry in terms of dollar value.
Governments such as the United States government provide a heavy public subsidy to petroleum
companies, with major tax breaks at virtually every stage of oil exploration and extraction,
including the costs of oil field leases and drilling equipment.
In recent years, enhanced oil recovery techniques — most notably multi-stage drilling and
hydraulic fracturing ("fracking") — have moved to the forefront of the industry as this new
technology plays a crucial and controversial role in new methods of oil extraction.
1
after exposure to heat and pressure in Earth's crust over hundreds of millions of years. Over time,
the decayed residue was covered by layers of mud and silt, sinking further down into Earth’s
crust and preserved there between hot and pressured layers, gradually transforming into oil
reservoirs.
Petroleum in an unrefined state has been utilized by humans for over 5000 years. Oil in general
has been used since early human history to keep fires ablaze and in warfare.
Its importance to the world economy however, evolved slowly, with whale oil being used for
lighting in the 19th century and wood and coal used for heating and cooking well into the 20th
century. Even though the Industrial Revolution generated an increasing need for energy, this was
initially met mainly by coal, and from other sources including whale oil. However, when it was
discovered that kerosene could be extracted from crude oil and used as a lighting and heating
fuel, the demand for petroleum increased greatly, and by the early twentieth century had become
the most valuable commodity traded on world markets.
An increase in the price of crude oil means that would increase the cost of producing goods. This
price rise would finally be passed on to consumers resulting in inflation. Experts believe that an
increase of $10/barrel in crude oil prices could raise inflation by 10 basis points
Petroleum is a naturally occurring liquid found beneath the earth's surface that can be refined into
fuel. Petroleum is a fossil fuel, meaning that it has been created by the decomposition of organic
2
Basic supply and demand theory states that the more a product is produced, the more cheaply it
should sell, all things being equal. It's a symbiotic dance. The reason more of a good was
produced in the first place is because it became more economically efficient (or no less
economically efficient) to do so. If someone were to invent a well stimulation technique that
could double an oil field's output for only a small incremental cost, then with demand staying
static, prices should fall.
Actually, there have been periods of time when supply has increased. Oil production in North
America was at an all-time zenith in 2019, with fields in North Dakota and Alberta as fruitful as
ever Since the internal combustion engine still predominates on our roads, and demand hasn’t
kept up with supply, wouldn't you expect that gas was selling for nickels a gallon at that time?
This is where theory pushes up against practice. Production was high, but distribution and
refinement were not able to keep up with it. The United States has built an average of one
refinery per decade (construction has slowed to a trickle since the 1970s). There's actually a net
loss: the United States has two fewer refineries than it did in 2009 refineries in the country have
more capacity than any other country's capacity by a large margin. The reason we're not awash in
cheap oil is that those refineries operate at 90% of capacity. Ask a refiner, and they’ll tell you
that excess capacity is there to meet future demand.
3
Need of the study:
➢ Transportation: To date, petroleum is the basic source of energy used in
transportation. Petroleum accounts for two-thirds of the total transportation fuel globally.
Gasoline/petrol, diesel, liquefied petroleum gas (LPG), jet fuel, and marine fuel are the
major transportation fuels obtained from petroleum. Cars, motorcycles, light trucks,
buses, trains, boats and ships use gasoline or diesel. Jet airplanes and some types of
helicopters often use kerosene.
➢ Power Generation: A thermal power plant uses petroleum for electricity generation.
Although coal is the major source of electricity generation, petroleum also accounts for
significant power generation that eventually results in serious environmental pollution.
Apart from these two uses of petroleum, the fuel has other industrial applications too.
These are:
➢ Lubricants: Almost all industries use lubricants for the proper functioning of
machinery.
Lubricants reduce friction in vehicles and industrial machines. However, they are even
used in cooking, bio-applications on humans, ultrasound and medical examinations.
➢ Pharmaceuticals: Certain by-products like mineral oil and petrolatum are used in the
manufacture of topical medicines. The complex organic molecules used in
pharmaceuticals are linked to simple organic molecules of petroleum byproducts.
4
Chemical Industry:
The raw materials of many chemical companies are by-products of a petroleum refinery.
Chemical fertilizers, synthetic fibres, insecticides, synthetic rubber, nylon, plastics, pesticides,
perfumes, dyes, paints etc are the significant products produced using the major by-products like
naphtha, grease, petroleum jelly, wax, butadiene etc.
5
Scope of the study:
• The sharp rising fuel prices has already started impacting citizens.
• Prices of many commodities are expected to go up due to rising fuel costs.
• The rising fuel prices in India will also have a effect on businesses spread .
• Therefore, the biggest reason behind higher fuel prices in the country is the
high rate of central and state taxes.
6
OBJECTIVES OF THE STUDY
• To study the impact of the higher oil prices on the Indian economy.
• To understand the reasons for price rise in petroleum in India.
• To study the impact on general public due to price hike in petroleum.
• To find a better and relevant solution for this problem.
7
RESEARCH METHODOLOGY
Secondary data research or desk research is a research method that involves using already
existing data. Existing data is summarized and collated to increase the overall effectiveness of
research. Secondary research includes research material published in research reports and similar
documents.
Sample size : 50 respondents
SAMPLE DESIGN: In statistics survey sampling describes the process of selecting a sample
to conduct a survey
8
Limitations of the study:
Combustion contributes dangerous gasses to the environment
The biggest limitation is the constraints.
The refinement process of petroleum can be toxic
Petroleum can be a trigger for acid rain
Petroleum transportation isn’t it 100% safe.
9
CHAPTER 2
THEORETICAL FRAMEWORK
Theoretical and empirical applications of petroleum production function
framework for analysis of the Phenomenon of Plenty
The current study examines how analysis of the Phenomenon of Plenty, paradox of economic
underperformance of resource-rich nations, could benefit from theoretical and empirical
application of suggested petroleum production function framework, basing on sample
oilabundant countries of the Commonwealth of Independent States, in particular Russia,
Azerbaijan, and Kazakhstan. Proposed approach displays capacity of oil-economy production
function to shed light on larger scope of theoretical issues. Empirical testing of suggested
theoretical framework exhibited ability of proxied components of devised production function,
capturing main metrics of the Phenomenon of Plenty and additionally factoring in corruption, to
exert a strong impact on the majority of twelve principal macroeconomic indicators monitored by
CIS supra-national institutions: with most pronounced influence on gross domestic product,
industrial production, capital investments, and export to CIS countries.
Introduction
Petroleum abundant economies suffering from negative repercussions of the Phenomenon of
Plenty, more commonly referred to as the Dutch Disease, require elaboration of refined
theoretical and empirical analysis techniques. Currently widespread and applied all-over-the
place ‘per effects’ approach relies on essential components of the Phenomenon of Plenty
represented by effects resulting in deindustrialization and deferrization of national economies.
However, economic analysis could also benefit by application of the toolset of consideration of
oil economies via production function’s settings, accounting for petroleum as a principal feature
differentiating oil-rich nations, and capital as core issue of our sample countries undergoing
financial liberalization. Validity of the theoretical framework of the Petroleum Production
Function for examination of hydrocarbon-intensive states is most appropriately tested by
applying this framework for empirical study in countries exposed to the Phenomenon of Plenty
across Eurasia, i.e. nations of the Commonwealth of Independent States, in particular Russia,
Azerbaijan, and Kazakhstan.
10
Section A : Theoretical capacities of petroleum
11
MOUNTAIN OF 2-INPUT PRODUCTION
Dramatic evolution of classical economics’ agricultural production function of variable labor and
fixed land in form was to successful mathematical testing of three factor economy model with
labor capital and land/terrain by Wick steed who demonstrated factor shares’ adding-up to/
exhausting total output, so corroborating John Clark’s tentative findings on Marginal
Productivity Theory of Distribution (MPTD), under condition that production function is linearly
homogeneous making all factors be rewarded with marginal products and consequently leading
sum of income shares to be equal to aggregate output . Land-marking investigations of Wicksell
also shed more light on production function via his research on theory of marginal productivity
and working-out of a clear-cut mode of exhibiting, as being asserted by many to be first in doing
so, of a principle ‘payments to production factors correspond to their marginal productivity’ and
modelling mechanics applying a stationary state framework - ‘wine production function’ with
removal of time from his original equation along with this, normative implications of MPTD.
12
Essential elements
Laid out just above 3-input Phenomenon of Plenty C-D type aggregate macroeconomic
production function is comprised by the variables and constants as follows monetary value of
aggregate output, i.e. produced goods and rendered services, of a national economy Lis amount
of labor force input in man-hours/number of FTE staff contributed/worked within a year
monetary value of a volume of capital stock (plant, machinery, equipment and vehicles) input in
local/foreign currency, a size of utilized energy minerals (i.e. petrochemicals) / natural resource
input, Ais a total-factor productivity (TFP) embracing output change determinants not included
in 3 main inputs; TFP is narrowed down here to the index of technological efficiency - which is a
level of technology or state of the art of production in economy (Hicks neutral). Domain of this
C-D function is determined in a positive 3-dimensional space by a set of numbers which lie to
the right from zero point since labour, capital, and energy minerals cannot have negative values.
Applied superscripts mean output elasticity α- Alpha from change in labour,β- Beta from change
in capital, and- Gamma from change in energy. Subscripts Booming sector Tradable
sector, )Nonreadable sector. Existing technological innovation is considered as neutral in a sense
of John Hicks’s “The Theory of Wages” (Hicks 1963), therefore congruently in its presence
while a fixed capital to labour ratio is maintained the respective ratio to each other of marginal
products (MP) for both of these production factors remain unchanged, in contrast to Roy
Harrod’s neutral leading MP and Robert Solow’s neutral A leading MP Extension is also
stipulated here for a third production factor Standing for natural resource determinant of
aggregate national output. Hence, all 3 factors of production under condition of their constant
proportion keep the same ratios of their marginal products, whereas technology Ais the sole
determinant of output which is changed under Hicks neutrality settings. Attribution of elasticity
value to production factors Exponents are positive numbers representing output elasticity to
changes of production factors and hence displaying responsiveness of national output
increase/decrease of labour, capital, or resources variables, as due to respective Portions of
output due to labour, capital, and natural resources are discernible in competitive markets’
settings as respective shares of , in 1. Elasticity is essential for channelling of energy policy
decision making of CIS authorities into optimal exploitation of petroleum endowments and
finding proper balance of all utilized production factors in maximization of national wealth. In
addition to oil level trade-offs there is capital level choice - massive accumulation of capital from
13
sterilized oil proceeds to national wealth funds broadens input adjustment options for authorities.
FIGURE Author. Scenarios of returns to scale for CIS oil nations Endowment with a property of
additivity to 1 of these exponents, , is envisaged with the purpose to have constant returns to
scale (CRS), which alternatively could be increasing (IRS) given , (output grows more than a
proportional increase) or decreasing (DRS) provided that , (output grows less than a proportional
increase). Equal/proportional increase of all 3 production factors
Theoretical and empirical applications of petroleum production function framework for analysis
of the Phenomenon of Plenty | BEH, September Business and Economic Horizons Prague
Development Centre assumed to result in ensuing augmentation of national by the same
coefficient: Author. Structural evolution of a production process can change over time
composition and portion in total inputs of labour which is getting more qualified, as well as
characteristics of capital including various machinery/equipment for different products and
natural resources, which grow/shrink basing on technological capacities and profitability of
As a diagnostic tool partial productivity technique performs well, however has a macroeconomic
performance is displayed by “petrostate” having positive significance effect on Export to CIS
countries and Export to other countries significance effect on Gross domestic product (GDP),
Industrial production and negative for Capital investments . After transformation of data taking
log “petrostate” and applying full 4-factor framework we document some similar findings with
fluctuating significance level whereas reporting supplementary positive impact on other
variables, in particular Consumer price index (CPI) at significance level, and Industrial
producers’ price index (IPPI) at significance level. Beneficial impact is exhibited by “fin open”
having positive significance effect on Gross domestic product Capital investments and Export to
CIS countries , significance effect on Import from CIS countries and Import from other countries
significance effect on Agricultural production and Retail trade turnover (TRADE). Once, we
estimate researched relationships after data transformation taking log “fin open” and deploying
full 4factor framework we mainly confirm findings for all listed above dependent variables with
slightly varying significance along with this we report ameliorated impact on Freight carried .
exhibiting it at significance level and negative statistically significant at impact on Consumer
price index Advantageous role is also exhibited by testing of a proxy for third component of
petroleum production function “human cap” having positive significance effect on Industrial
production significance effect on Gross domestic product significance effect on Freight carried.
14
CHAPTER 3
DATA ANALYSIS
AND
INTERPRATION
1. How many people consuming petrol and diesel per month
Interpretation :
From the above table and Pie chart we can see that consumption of petrol in the month of April is
high at 90% and consumption of diesel in the month of June is high at 85%.
15
2. Production of petroleum 2017-18
INTERPRETATION:
From the above table and bar chart we can see that production of petrol in the year 2018 is
high .
16
Source High Influenced Influenced
Customer 48% 52%
s
% 48% 52%
Interpretation:
From the above table, we can see that customers opinion on purchasing petrol is influenced.
17
4. The petrol prices will impact on Indian economy.
Sector Yes No
Customer A 30% 70%
Customer B 70% 30%
Interpretation:
From the above table and pie chart, we can see that both the customers are
contradicting each other vice versa.
18
Names Fixed station Anywhere
Ramu 100% 0%
Suresh 50% 50%
Interpretation :
From the above table and graph, we can see that “Ramu” is preferred to a fixed
station, but “Suresh” has equal chances of preference.
19
Online
Payment Mode Cash Cards (Gpay/Paytm/ Phone
pay)
Pavan 20% 70% 10%
Srujan 30% 30% 40%
Govardhan 100% 0% 0%
Interpretation
From the above table and bar chart, we can see that online payments are less
compared to card and cash payments.
7. Which of the following kinds of extra services would you use at a petrol station?
20
Extra Services Yes No
Car Services (Oil
50% 50%
Changes)
Restaurant 70% 30%
Utilities 40% 60%
Public toilets 20% 80%
30%
50%
60%
80%
70%
50%
40%
20%
Yes No
Interpretation
From the above table and donut chart, we can see that Restaurants and public toilets are use of
extra services.
21
8. What is the main causes for increase in petroleum prices according to you?
Particulars %
Supply 50%
Demand 90%
Interpretation
From the above table and chart, we can say that the demand of petrol is high
when the supply is low.
22
9. What type of vehicles do you prefer mostly?
Types %
Petrol 70%
Electric 30%
70%
30%
petrol electric
INTERPRETATION:
From the above table and bar graph we can say that consumption of petrol vehicle
is very high
23
10. Which petrol station do you prefer more?
Petrol Station %
HP 30%
70% 30%
Indian Oil HP
Interpretation
From the above table and bar chart, we can say that 70% of public uses the Indian Oil petrol in
their daily life.
24
11. Which country will produce more petrol and diesel as per the present scenario?
Vehicle %
UAE 40%
RUSSIA 60%
40%
UAE
RUSSIA
60%
Interpretation:
from the above table and pie chart we can conclude that Russia is producing more
fuel than UAE
25
12. Does the petrol prices are different from one state to another state?
State Prices
Telangana 109.05
Andhra Pradesh 112.70
Bihar 115.09
Prices
115.09 ₹
Bihar
112.7 ₹
Andhra Pradesh
109.05 ₹
Telangana
Interpretation
From the above table and bar graph we can say that different prices on different states.
26
Expenditure %
Below 1000 40%
Above 1000 60%
below 1000
above 1000
40%
60%
Interpretation:
from the above table and pie chart we can say that the expenditure above 1000 is 60% and below
1000 is 40%.
27
Profit/ Loss YES NO
Profit 90% 10%
Loss 40% 60%
40%
90%
Profit Loss
Interpretation: from the above table and bar chart we can say that profit is 90% and loss is
10%.
28
VEHICLE YES NO
Public 90 10
Private 20 80
10
80
No
90
Yes
20
Public Private
29
Interpretation: from the above table and chart we can say that public transportation is high
compared to private.
CHAPTER 4
FINDINGS, SUGGESTIONS
AND
CONCLUSION
FINDINGS
➢ The highest price was recorded from fuel wherein petrol was traded at the rate of Rs.105.45
per litre while diesel stood at Rs.96.71 per litre.
➢ Petrol price in India opened in the March standing at the rate of Rs.95.45 per litre while
diesel prices stood at Rs.86.71 per litre.
➢ The price of the fuel stood steady in India during the The highest price was recorded on 31
March for both the fuel wherein petrol was traded at the rate of Rs.101.85 per litre while
diesel stood at Rs.93.11 per litre.
➢ The public are not satisfied about the prices inflection’s
➢ The public are not comfortable about the price on petrol and increasing rapidly India.
➢ The price of the fuel stood steady in India during the month. In the month of February, the
prices of both the fuel were unaltered and witnessed no fluctuations.
30
SUGGESTIONS
31
CONCLUSION
This study concluded that petroleum plays avital role in our lives While technologies are being
invented to reduce our dependence on fossil fuels, it will be several decades before they become
commonplace and affordable. Some of the major car manufacturers across the world estimate
that it will be at least 2025 before electric vehicles are competitive in terms of cost and
performance with petroleum powered vehicles.
The price movement will immediately reflect on the account books of oil marketing firms, but
greatly help in the long run since there is no need maintain loss or subsidy. Apart from this, it
will increase of overall sales of oil marketing companies
32
CHAPTER 5
BIBILOGRAPHY
Referred from Books:
• Fuel Pricing in India by Ananda Jit Goswami (ed)
• Understanding Oil Prices, A Guide to What Drives the Price of Oil in
Today's Markets by N. Madhava
Websites:
• https://www.bankbazaar.com/fuel-price-india.html
• https://www.financialexpress.com/market/commodities/petrol
• https://www.news18.com/news/business/markets/petrol
33
CHAPTER 6
ANNEXURE
Questionnaire
34
7. Which of the following kinds of extra services would you use at a petrol station?
o car services
o restaurant
o utilities
o public toilets
8. What is the main causes for increase in petroleum prices according to you?
o supply
o demand
11. Which country will produce more petrol and diesel as per the present scenario?
o Uae
o Russia
12. Does the petrol prices are different from one state to another state?
o Telangana
o Andhra Pradesh
o Bihar
35
o Above 1000
36