Falling fuel prices and its ramifications
The OPEC has decided against cutting supply. For the first time in a decade the demand for fossil fuel has seen decline. Also the Shale boom might be lending to this cause. This mean that there is less demand and more supply. Leading to a fall in international crude prices. The crude pieces are now way below the break even points for some countries. But cutting short the supply to maintain prices are out of question.
What’s in for us.
$1 fall in the price of oil saves us about 40 billion rupees. Falling fuel prices mean our imports will cost less. We will spend less dollars to buy the same amount of oil. This implies a appreciation of the rupee. Also the current account deficit may reduce. Not only this but a short term further reduction in inflation.
Good for the government but bad for oil refineries importing oil.
The appreciating currency may cause a bullish patten with the IT companies in India. Automobile sector can get a breather. Also the Airline industry is to gain. Time to invest in Oil Marketing Industries-Paint industry, tyre, oil based raw materials
Some points we might miss is that the fall in fuel prices will affect the budget in OPEC and other middle east countries. This will lead to job cuts, and an influx of a unemployed workers to India.