Oil markets and India

Abstract

Crude oil price shocks have caused many derailments in the economies around the world. While on some occasions there have been positive spikes in the oil prices on other occasions oil prices have given negative surprises. Every time oil prices display large swings in prices there have been widespread implications in the global economy. Large run-up in prices has been accompanied by geopolitical tensions and sharp declines have indicated either a supply glut or slowdown in the global economies. In the last year, the oil prices have declined rapidly by over 30%. The primary causes for such a sharp move has been attributed to a supply glut in the US and a global economic slowdown led by Eurozone and China. While straining the fiscal accounts of the oil exporting countries, the oil importing countries like India, on the other hand, have lot to benefit from such price declines, with declining CAD being one such shot in the arm. The dip in the oil prices has foreign policy implications for many countries as well. Countries like Russia, Saudi Arabia, and Venezuela are facing severe policy making problems. It has caused steep fall in Ruble and as a resulted in more severe effects of the imposed sanctions. Many such countries have their fiscal policy numbers tied to oil market dynamics.