Oil likely to cross $80 barrel in 2016

DECCAN CHRONICLE
Published Jan 2, 2016, 7:33 am IST
Updated Mar 26, 2019, 12:50 pm IST
Over double the current price of $37.04 a barrel — in 2016.
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Hyderabad: Crude oil price is likely to cross $80 a barrel — over double the current price of $37.04 a barrel — in 2016, if we were to believe experts tracking this commodity. According to the International Energy Agency (IEA), a grouping of oil consumers, expects shale oil output in the US to shrink by over six lakh barrels per day in 2016 if current low oil prices persist.

The US shale oil and the UK’s North Sea oil have higher cost of production and a prolonged low price will force them to shut down their operations. With American oil co-mpanies pumping more oil, Saudi Arabia launc-hed a price war against the United States by increasing its supply  and convincing other Opec countries to accept low oil price for the time being to to drive American oil companies out of business.

 

“As more high-cost production is either shut down or slowed down, Opec’s pricing power will come to the fore,” said a Reuters report. Any fall in crude oil supply from the United States or North Sea would increase the price due to supply-and- demand dynamics.

If the crude oil price goes up, it will impact adversely consumer countries like India. Despite the global slowdown, India is being called a bright spot because of the savings that the country had on the account of low crude oil.

Historically, India had suffered whenever oil price hit the roof as costly crude leads to higher current account deficit, higher subsidy bill and higher inflation. The Narendra Modi government had managed to partially keep fiscal deficit in check by hiking taxes on fuel price despite a lower global crude oil price.

 

 

 

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