Plummeting crude prices could save India $17 bln in imports

New Delhi, Aug 31 (UNI) India could save a whopping 17 billion dollars in the crude oil import bill as crude oil prices are dipping after touching the 150 dollar mark, an Assocham Eco Pulse (AEP) study said today.

The Study, titled 'Crude Economics', estimates that the oil import bill for the current fiscal would have soared to 125 billion dollars had the crude oil prices remained at the level of 145 dollars per barrel.

The prices are currently hovering between 110-120 dollars a barrel.

With the prices heading south, the import bill would be restrained to about 108 billion dollars, assuming the prices average out 120 dollars per barrel for the last three quarters of the fiscal 2008-09, the study said.

In FY08, the import bill for crude oil was 67.98 billion dollars.

The study said crude prices have slipped almost 25 per cent since reaching an all-time high of 147.27 dollars per barrel.

''Considering the government estimates of five to six per cent rise in the volumes of crude oil import bill to around 129 million tonnes this year, there would be a jump of 58 per cent in the crude oil import bill from FY08,'' it said.

The softening of prices may come as a respite to the burgeoning current account deficit, which is growing at an alarming rate mainly due to the rising crude oil bill.

Trade deficit for the first quarter of the fiscal (April-June 2008) widened 42 per cent on account of a 50.2 per cent rise in the oil imports.

The oil import bill for Q1 FY08 stood at a astounding 25.5 billion dollars as compared to 17 billion in the same quarter last fiscal.

''The economic forces at play in; shrinking demand and improving supply facilities may cool down crude oil prices further which would lead to a narrower than estimated current account deficit. It's a good positive sign for the economy,'' said ASSOCHAM President Sajjan Jindal.

The Indian crude oil import grew 9.11 per cent in volume terms and a staggering 40 per cent in dollar terms for FY08 over the last fiscal.

This upsurge in the crude import bill was on account of a steep rise in the Indian basket price from 62.4 dollars per barrel to 79.2 dollars a barrel.

Oil prices have nosedived mainly on account of correction in demand, easing supply conditions and stronger US dollar.

The demand in the US, the biggest oil consumer, has fallen sharply from 20.7 million barrels per day (mbpd) in 2007 to 19.88 mbpd in the first quarter of 2008, the study noted.

The OECD-European countries have followed suit with a slowdown in demand for oil from 15.28 mbpd in 2007 to 15.24 mbpd in the first quarter of 2008.

On the supply side, Saudi Arabia, the largest oil producer has planned to raise production to 9.7 mbpd, its highest level in 27 years.

With minor hiccups in the supply condition because of the geopolitical tensions, the outlook remains bright, unless the oil cartel, OPEC, which controls 78 per cent of the world oil reserves, decides to cut down production in order to put brakes at the declining crude prices, the study said.

With the greenback appreciating by as much as six per cent versus Euro in the last three months, the effect is visible in the cooling down of the crude price.

The average Indian basket price of crude oil was 119 dollars per barrel for the first quarter of the fiscal 2008-09.

However, for the coming quarters in view of the demand-supply dynamics, the Indian basket price is also set for a big downfall.

The International Energy Agency (IEA) estimates the oil demand for India at 3.13 mbpd, 2.85 mbpd and 3.17 mbpd in Q2, Q3 and Q4 in FY09.

The IEA has also trimmed the projected growth in global oil demand from 2.3 per cent in January 2008 to just one per cent by July 2008.

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