"Reduction in crude oil prices: its potential benefits for India"

Why in the NEWS?

• One week after Donald Trump became president and declared an energy emergency, Brent crude oil prices fell 3 percent.

Key Points:

• Trump's announcements: 
  • Trump promised to increase US oil production, and declared a "National Energy Emergency". 
  • The aim was to boost oil production in the US, which could increase global supply and lower prices.
• Brent crude oil prices fall: 
  • Due to the impact of Trump's announcements, oil prices fell in the global market, due to the possibility of increasing oil production.

What will you read next in this topic?

1. Fall in crude oil prices:
2. Its impact on India:
3. Impact of US policy:
4. Impact on India's refiners:

Fall in crude oil prices:

• On January 17, 2025, the price of Brent crude oil was $80.79 per barrel, while on January 24, 2025 it fell to $78.26 per barrel.
• The main reason for the fall is weak global demand, which affects crude oil prices. When demand is low, prices fall.

Its impact on India:

• Reduction in oil import cost: 
  • India is a large importer of crude oil, and a fall in crude oil prices will give India a reduction in its oil import cost. 
  • This can reduce the current account deficit, which can reduce the pressure on the Indian currency (rupee).
• Reduction in inflation: 
  • Lower oil prices can reduce the transportation cost of products and services, which will reduce the pressure on inflation. 
  • This can provide relief to consumers and can be positive for the Indian economy.

Impact of US policy:

• After Donald Trump became president, he planned to increase domestic oil and gas production and declared a "national energy emergency". 
• This meant that the government would take every possible step to increase oil production in the US.
• He used to say, "We will drill, baby, we will drill", which was an indication that the US government would try to increase supply in the global market by increasing oil production in the US.
• Geopolitical situation: 
  • US policy after Trump planned to increase crude oil production, which put downward pressure on oil prices.

Impact on India's refiners:

• US sanctions on Russia: 
  • In January, the US government imposed sanctions against Russia, which caused difficulties in the supply of Russian oil to Indian refiners. 
  • Oil supplies from Russia were affected, and Indian refiners are now trying to meet it from West Asia (such as Saudi Arabia).
• Supply chain impact: 
  • Importing oil from Russia was a normal process, but now Indian refiners may face price volatility due to increased oil imports from West Asia.
• Slowdown of Chinese economy: 
  • If China, which is a big consumer of crude oil, sees its economy slow down, then demand for crude oil may decline, which may lead to further decline in prices.
  • According to Dharmakirti Joshi, chief economist at Crisil, US policy is to boost crude oil supply, and this may lead to further decline in crude oil prices in the coming months.