How Important Is India In The Determination Of Crude Oil Prices?
India, the world’s third largest economy, held proved oil reserves of 5.7 billion barrels at the end of 2014. The country’s oil reserves are almost negligible compared to the global oil reserves, while its oil consumption is a notable portion of the global demand. For instance, India’s oil demand was roughly 4 million barrels per day in 2015, though its domestic production was less than a million barrels per day during the year. Hence, the country had to rely heavily on global imports to meet its growing demand for oil. In this note, we show how India is an important factor in determining crude oil prices.
As mentioned earlier, India’s demand for crude oil has been growing at over 3.5%, which is a faster rate than the global demand for oil, over the last 15 years. However, due to the scarcity of oil reserves and other geo-political factors, India’s oil production has remained low during the same period. Thus, the Asian country has resorted to large global oil imports over the years. In fact, India imported 3.79 million barrels per day in 2014, which is almost all of its oil demand during the year. Since the country accounts for close to 10% of the global oil imports, it is a crucial factor to be considered while determining the global crude oil prices.
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Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Chesapeake Energy
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