1. Depressed oil prices Challenges & Opportunities Sudha Mahalingam, Fmr Member, Petroleum & Natural Gas Regulatory Board
AESS, Goa, India. March1-3, 2016

2. How steep the fall?
, 2000, 2008
$140 in 2008, 115 in 2014 June, then downward spiral
Lowest in 12 years
Gazing into a crystal ball – where will this spiral stop? Stanchart $10, Morgan Stanley $20, in any case, not anytime soon

3. Why are oil prices crashing?
Just a cyclical trend?
Over-production by OPEC?
OPEC refuses to cut quotas – tragedy of the commons
Shale glut?
Demand deceleration?
Geopolitics? Russia, Iran, Saudi Arabia
Drive shale out of market?

4. The Winners - India
Government, automobile, paint, cosmetics, aviation, consumers
But fall in pump price not in tandem with fall in crude price – crude down by 60%, but pump price down by less than 10% (15000 crore excise revenue)
Fiscal deficit down (3.5%) , current account deficit down
Import bill down .
A fall in oil prices by $10 per barrel helps reduce the current account deficit by $9.2 billion, according to a report by Livemint. 
. Every $10 per barrel fall in crude oil price helps reduce retail inflation by 0.2% and wholesale price inflation by 0.5%, according to a Moneycontrol report.
Petroleum subsidy 1.39% of GDP going down further
Gas consumers, LNG imports cheaper
SPRs – 28mb capacity (10-12 days) Rs.2400 cr budget allocation last year, none this year

5. The Losers
Oil companies – ONGC profits drop 11%, product exports earn less
Oil exporting countries – turmoil, political instability
Lower remittances from expat Indians
Job losses /Rigs down to 698 as against 2000 in 2014
LNG projects on hold, KG Basin down
Renewables, Climate change action
Stock markets
Investments in E&P slowing down

6. Conclusions Both a challenge and opportunity Make in India
Budget 2017 does not send the right signals
Myopic Policies – consumers continue to pay high prices, but revenues not used to create cushion/infrastructure
Low investments foretell demand-supply mismatch