What Is Crude Oil ⁉️
Crude oil is a naturally occurring, unrefined petroleum product composed of hydrocarbon deposits and other organic materials.
It is often called "black gold,"
Crude oil is typically obtained through drilling, where it is usually found alongside other resources, such as natural gas
The process by which oil is heated and separated in different components, is the first stage in refining.
✅There are several end product types of crude oil refining processes
✔️Fuel gas.
✔️Liquefied Petroleum Gas (LPG)
✔️Petrol / Gasoline.
✔️Diesel
✔️Kerosene
✔️Jet fuel
✅OPEC
The Organization of the Petroleum Exporting Countries (OPEC) was founded in Baghdad, Iraq, with the signing of an agreement in September 1960 by five countries namely Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. They were to become the Founder Members of the Organization.
OPEC Organization has a total of 14 Member Countries at present.
These 14 member countries accounted for an estimated 44 percent of global oil production and 81.5 percent of the world's "proven" oil reserves, giving OPEC a major influence on global oil prices
✔️How crude oil price impacts our economy and Indian stock market
India is major importer of crude oil for its oil requirement.
Since the payments are made in the US dollars, India’s deficit will depend on CRUDE PRICES as well as on the USD/INR exchange rates.
Crude prices also impacts on USD and INR conversion.
Hence the larger the outflow of US dollar, the sharper will be the rupee depreciation (weakness).
✅Impact of crude on petrol/diesel.
✔️Falling crude prices is good to
Decline petrol/diesel prices.
A decline in crude prices would lead to decline in petrol and diesel prices. It's also useful for easing inflation because crude oil accounts weighatge in India's wholesale inflation index -- the WPI.
✔️Rising crude prices is BAD and it impacts for rise in petrol/diesel prices.
Rise in crude prices would lead to increase in petrol and diesel prices. Such situation can be problem for rise in inflation.
✅Impact of crude on paint companies
Crude oil is a key raw material in the production of paints.
Drop in crude prices are good for paint firms like Asian Paints, Berger Paints. While rise in crude prices are NOT GOOD for paint companies.
Titanium dioxide and other crude derivatives such as PAN and PENTA together form about 40-50% of total input costs for these companies. If crude prices comes down then inputs prices comes down and so falling crude prices are good for paint companies. If crude prices rises then it has bad impact on paint firms.
✅Impact of crude prices on adhesive making companies
Pidilite industries have bad impact of rising crude oil prices and weaker rupee and vice versa.
As much as 60% of the company’s raw material costs come from vinyl acetate monomer (VAM), a key raw material that is a derivative of crude oil.
Since Pidilite meets its VAM requirement largely via imports, so weak rupee has bad impact because import cost will rise due to a depreciating rupee should pose a risk to margins.
There are lot more implications of crude prices on our economy. Our GDP, CAD (current account deficit), Balance of Payments (BoP), all depend majorly on crude prices.