PRESENTED TO:

ATISH GUPTA
CHIEF BRANCH MANAGER

REASONS BEHIND INDIABULLS SECURITIES LTD

DECLINE IN
CRUDE OIL
PRESENTED BY:
N.SAJANA
PRICES
ALLIANCE SCHOOL OF BUSINESS
BACKGROUND

• Like prices of other commodities the price of crude oil experiences wide
price swings in times of shortage or oversupply. 
• The crude oil price cycle may extend over several years responding to
changes in demand as well as OPEC and non-OPEC supply
• Over decades there have been fluctuations in the prices of crude oil.
• Throughout a timeline of 60 years (1950 to 2010), price of crude oil was
highly effected ( I.e. fell down to less than half of its previous trading price)
due to excess production (1980’s) and during global recession period
(2009).
 FACTORS
INFLUENCING
DECLINE IN THE
PRICES OF CRUDE OIL
 “
1. Inelastic demand and increased supply
2. Non interference of OPEC to bring a balance to
the fluctuations in the crude oil prices
3. Global reccession
1. PRICE DROP DUE TO DEMAND AND SUPPLY

 There is an increase in production (supply) of the crude oil.This is mainly

because,US started producing oil domestically using technological advancements
such as ‘FRACKING’.
 This led to decline in US’s import of oil from the oil exporting countries like
saudi, Nigeria, Algerian markets.
 The producers were now competing for Asian markets and were forced to drop
the prices
 In addition, Iran which was blocked from importing the latest Western oil field
technology and equipment, has been lifted from the restrictions which further
pumped the production.
 However as the demand for products like oil is inelastic in the short run,the
developing market’s demand did not match with the excess supply leading to
further fall in prices.
2. NON INTERFERNCE OF OPEC TO TACKLE
THE SITUATION
 The Organization of Petroleum Exporting Countries (OPEC) is an organization
consisting of the world's major oil-exporting countries
 It is a cartel that aims to coordinate the petroleum policies, support its members with
technical and economic aid and to manage the supply of oil in the global markets.
 However that kind of cooperation is much less likely, as oil-producing countries are
not even able to work together to raise prices.
 The major dominant power among the member countries of OPEC-Saudi Arabia is
accused of non co-operation with the less influential and weaker producers like
Nigeria and Venezuela with regard to lowering the production levels to bring the
prices up.
 CONTD..

 Saudi Arabia as a nation with strong oil reserves can sustain cut in the oil prices for
many decades to come.
 Though lowering of production levels by OPEC members will lead to increase in
the prices, this is not in the best interest of Saudi Arabia
 It means losing its market share to it’s member countries for Saudi Arabia.
 In addition to this, Saudi Arabia expects fall in the production levels from US
Countries in the near future as these countries are mainly depending on the
technological advancements to produce oil .
3. GLOBAL RECESSION

 There was hike the prices of crude oil due to increase in the demand from the
developing countries.
 Due to the global recession, the emerging economies were deeply effected.
 These countries which were initially reason for increase in the prices eventually led to
huge cut in the prices.
 The global recession led to decrease in the demand of the crude oil by the countries
like India, Brazil, Russia.
 Decrease in the demand led to drop in the crude oil prices.
WINNERS
AND
LOOSERS
DUE TO DECLINE IN THE CRUDE OIL
PRICES
GAINERS
 Developing countries
 Non oil producing countries
 Increase in the purchasing power
of all the users of crude oil and
its products.
LOOSERS
 OPEC members like Venezula,
Nigeria and Oil producing countries
like Russia which did not have strong
reserves to sustain drop in the prices
 An estimated250,000 oil workers
have lost their jobs, and
manufacturing of drilling and
production equipment has fallen
sharply.
Thank You