Soon, a litre of crude oil may be cheaper than a ‘cutting chai’

On January 12, considering US $ stands at Rs 66.90, a litre of crude oil stands at just Rs 12 while a bottle containing one litre of mineral water is sold higher at Rs 15 to Rs 18 by the retailers. If industry experts and global research giants, investment bankers are to be believed, a litre of crude oil may soon be available in this country at a price lower than a cup of ‘cutting chai,’ priced at Rs 6. In fact, research firms globally seem to be in a race to predict the lowest possible price of crude oil in the immediate future. While Goldman Sachs has predicted price of crude oil to fall to US $ 20 per barrel in its recent research report, Morgan Stanley’s report published on January 11 claims crude prices soon may fall to US $ 8/barrel. Earlier Standard Chartered had predicted crude prices to fall as low as US $ 10/barrel.

“The oil market is even more oversupplied than we had expected and we now forecast this surplus to persist in 2016.  The potential for oil prices to fall to such levels, which we estimate near $20/bbl, is becoming greater,” Goldman Sachs said in its research report. Morgan Stanley report reveals, “a five per cent increase in the value of US $ against a basket of several currencies would force crude prices down by 10-25% taking it to fall as low as US $ 8/barrel.” 
Headquartered in Paris, International Energy Agency, one that monitors oil market trends across the world has claimed due to non-OPEC production growth by 300,000 barrels/day in last November and production of crude oil from countries outside the cartel rising by 2.2 million barrels/day may lead to further fall in prices of crude oil in the global market.

As of January 11, Indian crude basket is priced at little above of US $ 29/barrel which means a price of Rs 1965.45 per barrel considering at Rs 66.91 per US dollar. As each barrel is interpreted to 159 litres of crude oil, estimated price of crude oil per little in the country stands at almost Rs 12. If the reports of Morgan Stanley or Goldman Sachs are found to be true in near future, a litre of crude may be priced at around Rs 5 a litre in an energy-starved country where oil exploration companies like ONGC and Cairn are already battling with the constantly lowering prices of their explored commodity. The Oil Marketing Companies are, however, in a mood to celebrate and so is the mood among the airlines, enjoying the most of the benefits of low crude oil prices.

In a media release earlier, Executive Director of International Energy Agency, Fatih Birol had said, “It would be a grave mistake to index our attention to energy security to changes in the oil price. Now is not the time to relax. Quite the opposite; a period of low oil prices is the moment to reinforce our capacity to deal with future energy security threats.” The World Energy Report published by the Agency also says the plunge in oil prices setting in motion the forces that lead the market to rebalance, via higher demand and lower growth in supply. So while there are reasons to celebrate a lower crude price, there are reasons also to stay cautious at this critical moment.

Meanwhile, we can wait in comfort to check out crude prices during next few weeks when it may touch the price of a ‘cutting chai’ in Mumbai.

Tailpiece: Overheard in Kolkata recently, ‘if oil is getting so cheap, why not oil the bosses more to make them happier and get our dues!”