Impact of Changing Oil Prices on Demand and Supply: Managerial Economics

MANAGEMENT
ECONOMICS- 2

Table of Contents
INTRODUCTION...........................................................................................................................1
CONCLUSION ...............................................................................................................................1
REFERENCES................................................................................................................................1

INTRODUCTION
With the changing time the prices of oil has also been considered very important as the
are rising day by day and in this respective report there is the descriptive analysis of
change in oil prices over different phases of time. The price of crude oil is generally
called the spot price of barrel and the price of oil is identified by the international
demand instead of any country's domestic productivity stage. The planetary price of
crude oil was the same in the nineteenth century and early twentieth century and the
prices were hanged in 1970s with slight rise in the cost of oil internationally. There have
been some of the drivers of the variations in the prices involving the oil supply, demand
and storage shocks. It came to the urgent notice that due to immediate high prices of oil
is making people feel insecure about their other expenses as they are dealing with the
high charges(Carrillo Arciniega, 2021).
Effects of higher oil prices
It is essential to consider all the impacts of the high prices of the oil in the oil industry
and some of the major impacts are as follows:
 Higher prices have adverse effect on fiscal deficit: India imports 1.5 billion barrels of
crude oil per year. This amounts to over 86 percent of the country's annual crude oil
needs. As a result, rising crude oil prices may increase India's spending, reducing the
country's fiscal deficit (the difference between total revenue and total spending). The
amount of money borrowed by the government to cover its expenses is known as the
fiscal deficit. An increase in the fiscal deficit could be harmful to the economy and
financial markets.
 Impact on rupee: The rise in crude oil prices has visibly impacted the Indian rupee. On
May 24, 2018, the rupee was valued at 68.34 against the US dollar. The rupee is
approaching an 18-month low, according to a Livemint story, and is only 0.6 percent
away from its all-time low of 68.825. In addition, if crude oil prices remain high, the
rupee is expected to fall even further by the end of the year. The rupee's devaluation has
an impact on the Indian economy and even the stock market.
 Impact on current account deficit: India's dependency on crude oil imports has only
increased in recent years. From 77.3 percent in FY2014 to 83.7 percent in FY2018, the
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