Chinua Crude Prices And Its Implications On India

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FALL IN CRUDE PRICES & ITS IMPLICATIONS ON INDIA
Introduction:
The presence of crude oil was first discovered in China way back in 3rd or 4th century A.D. The presence of oil in India was discovered in late 1889 at Digboi in Assam where the first crude oil refinery was set up in 1901. India is not among the major oil producers and that is why it generally depends on imports from other countries. The largest crude oil producing country is Saudi Arabia followed by Russia and America. The extent of the commodity’s importance was shown to the world when the world’s strongest economies were shaken up as the oil prices shot up in 1973 and 1979, after this the whole oil sector was nationalized in India. Currently, crude oil alone is responsible
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One of the main reasons is the mismatch between the demand and supply of oil. Due to sluggish pace of global economies, the demand has been reducing. The other more important reason is tremendous increase in production levels by the oil extraction using Shale Gas formations in wells of Texas and North Dakota. When the oil prices were at $110-115/barrel, they drilled oil from shale gas formations which was earlier considered unviable due to low profit margins. This drilling has resulted into a supply glut which is further helped by Saudi Arabia and OPEC who are reluctant to decrease production. Source: www.wtrg.com
It is said that OPEC as a cartel has been unfruitful is maintaining the price levels. Some say that OPEC and Saudi Arabia are purposely not relenting to reduce the production as oil production from Shale Gas formations is much more expensive than oil production at Saudi Arabia (~$5-6/barrel) which is the lowest in the world. OPEC and Saudi Arabia hope to wipe out the Shale Gas producers by the continued fall of crude oil price levels to less than $50/barrel after which it is believed that it would be unviable for the Shale Gas producers to continue.
Impact of the fall for India Crude Oil prices affect the life of the average human being in India in multiple ways- from food prices to transport costs. It would seem that falling crude oil prices is great news which couldn’t
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