Oil 1 Peak Oil 21
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India – EconomyRising energy costs will cause a recession in India; increased blackouts and subsidies are sapping up government resources Tom Whipple, fmr CIA energy analyst and editor at Falls Church News, 7-16-08 http://www.fcnp.com/index.php?option=com_content&view=article&id=3301:the-peak-oil-crisis-the-blackouts-spread&catid=17:national-commentary&Itemid=79, The Peak Oil Crisis: The Blackouts Spread, Falls Church News-Press India's energy shortages are more serious than China's. Its nuclear power plants are failing, hydro-power from the Himalayas is drying up due to global warming, and the costs of imported fuels are soaring. Over 85 percent of India's oil must be imported and coupled with the subsidies of oil prices the increasing costs are taking a heavy toll on the state budget. Although the situation in India is not yet as bad as in Pakistan, blackouts and liquid fuel shortages are being reported almost every day somewhere in the country. There is no end in sight to this situation and likelihood of an economic slowdown, coupled with water and food shortages, is increasing. India – Economic GrowthContinued high oil prices will derail the Indian economy Visal Khan, Biotechnology consultant, 7-16-08 http://www.centralchronicle.com/20080716/1607322.htm, How to meet our energy demands? Central Chronicle I would like to refer my article appeared in Eagle eye in CC 25th.July 2007 for `Jatropha- meeting energy demand' (for commercial consumption of bio-diesel.). It was suggested that 60 million hectare wasteland of India which has a burden of maintenance cost today, can easily be used for cultivation of Jatropha curcus which may yield 60 million tones bio-diesel. In this way we will economize Petroleum import of Rs 10 billion per annum, but this programme will create 120 million jobs. I would like to inform readers here that Global energy crisis looms large, with crude oil prices hovering over the $111.80-per-barrel mark, which it hit on March 17. It later fell to $105.11. With international crude oil prices shooting through the roof, the basket of crude oil that Indian refiners buy too recorded a record high of $101.2 per barrel. On the backdrop of a global meltdown, the rise of oil prices is a cause for concern. The spiraling oil prices will derail a booming economy if not checked. So why are oil prices soaring like crazy? Will there be some respite in the near future? The answers are shifting to non-conventional energy use. The fall in the dollar rates is just one of the factors that has led to this astronomical rise in oil prices. A weaker American currency tends to increase the demand for dollar-denominated oil as it becomes cheaper for buyers using stronger currencies. Oil prices are also heading higher because investors are seeking a safe investment for their cash amid fears of rising inflation and a US recession, analysts said. Political tension in Kenya, Algeria and Pakistan as well as the threat of US sanctions against Iran earlier this year also aggravated the situation. Threats to oil facilities in Nigeria--the world's eighth largest oil exporter--have also been responsible for the oil price hike. The attacks from rebels in the Niger delta, demanding more control over oil reserves led to shutting of many oil facilities in 2007. Militant attacks in Nigeria's main oil city, Port Harcourt also hit supplies. Nigeria is also likely to witness more violence as peace talks between the government and rebels have failed. Today's rate of $135 for a barrel of oil equals about approx Rs. 34/- per litre (1 barrel = 159 litres) To this you must add landing costs, refining costs, distribution costs, of course some profitability to the oil cost which should make petrol cost what it is costing today. India’s attempts to curb oil-driven inflation will fail and curb economic growth The Economic Times, 7-15-08 http://economictimes.indiatimes.com/News/Economy/Policy/RBI_likely_to_hike_key_rates_further_on_July_29__DB/articleshow/3238005.cms, RBI likely to hike key rates further on July 29 : D&B The Reserve Bank of India is likely to announce a further hike in its key-rates in the quarterly policy review scheduled at end-July in the face of high inflation and record crude oil prices, Dun & Bradstreet's has said. "It is expected that the RBI would continue with its monetary tightening policy in order to curb demand side pressures...we expect further hikes in the policy rates by RBI in the forthcoming policy review," D&B said in its report on Tuesday. In a bid to arrest inflation, RBI had hiked its Cash Reserve Ratio and repo rates to 8.75 per cent and 8.5 per cent respectively in the last few months. A further hike in RBI key-rates is likely to affect demand in interest rates sensitive sectors such as auto, consumer goods, construction, which, in turn would lead to moderation in IIP growth, D&B said. The recent fiscal and monetary measures will have a limited impact in curbing inflation owing to the high fuel prices, it said. "Given the continuous increase in global crude oil prices and existing supply constraints, we expect WPI to average between 12.2 per cent-12.4 per cent during July, 2008, D&B said. With further tightening in the monetary policy, short-term interest rates are expected to remain high, the report said, adding, "we expect 15-91 days Treasury bill yields to remain in the 8.8-9 per cent during July 8." India – A2 Airline LossesOil prices don’t affect India’s airline industry India PR Newswire, 7-5-08 http://www.netnewspublisher.com/despite-high-oil-prices-airlines-in-india-could-be-profitable/, Despite High Oil Prices, Airlines in India Could be Profitable, KPMG in India in its analysis of the aviation sector believes that India’s airlines can achieve break even and become profitable despite rising fuel, as long as they focus on improving airline efficiencies, improve processes, switch to leaner business models and cost optimize their business operations. The point of view released by KPMG in India titled, “Indian Aviation: Flying Through Turbulence” cites that air traffic in India is no longer a mere statistic but a phenomena that is based on the fact that people from every walk of life, demographic, ethnicity and culture have opted to travel because not only is the world increasingly getting closer, but quality of time and the productivity is increasingly becoming the focus. Responding to reports of a likely slowdown in the aviation sector in India, the point of view states that the growth in air travel globally and in India will be adversely influenced by epidemic outbreaks, economic recession, terrorism, shifts in policy and regulations and competitive markets but not by oil prices. Although ATF price hikes is having its toll on the airlines profitability, the KPMG analysis believes that it is currently not possible for any airline in India to make profits within three years of starting operations as average airline break even based on prevalent capital expenditure typically occurs in a minimum of five to seven years of operations. While ATF presently accounts for 30 ~ 35 percent of airline operating costs, it is also relevant to note that an airline would only spend on ATF when it operates a scheduled flight and coincidentally enough, that is also when it generates revenue. Hence, airline’s expenditure on fuel is directly proportionate to occupancy and load. A2 India – Currency UpIndia’s currency is on the upswing – this mitigates increased oil prices Bloomberg, 7-18-08 http://www.bloomberg.com/apps/news?pid=20601091&sid=asobKnuCen04&refer=india, India's Rupee Heads for Second Winning Week as Crude Oil Slumps India's rupee headed for a second weekly gain as a slump in crude oil prices spurred speculation the nation's import costs will decline. The local currency climbed to the highest in more than three weeks after oil in New York slid 10.3 percent this week, the most since April 2005. India depends on imports to meet three-quarters of its annual energy needs. The rupee also advanced on speculation gains in local equities will attract global funds. ``Oil has fallen quite a bit in recent days and that's helping the rupee,'' said Pradeep Khanna, head of currency trading at HSBC Holdings Plc in Mumbai. The rupee gained 0.2 percent this week to 42.78 per dollar as of 10:23 a.m. in Mumbai, according to data compiled by Bloomberg. It rose as high as 42.66 earlier. The currency has rebounded 1.6 percent from a 15-month low of 43.475 touched on July 1. The rupee may trade between 42.65 and 42.85 today, Khanna said. Crude oil in New York closed at $129.29 a barrel yesterday, the lowest since June 5. A2 India – Economy OkayEconomic response in India to inflation is political and the market is improving Economic Times, 7-17-08 http://economictimes.indiatimes.com/Equities_end_higher_on_easing_in_crude_oil/articleshow/3246339.cms, Equities end higher on easing in crude oil Bolstered by positive global cues and receding crude oil prices, equities in India snapped their week-long losing streak to end sharply higher om Thursday. Investors covered short positions and also made fresh purchase at lower levels. National Stock Exchange’s Nifty settled 130.5 points or 3.42 per cent higher at 3947.20. The index touched a high of 3968.75 and a low of 3823.15 intra day. Bombay Stock Exchange’s Sensex ended up 536.05 points or 4.26 per cent at 13,111.85 after swinging in a range of 13,150.35 and 12,843.79. The BSE Mid-cap Index ended up 1.39 per cent at 5,155.34 and the BSE Small-cap Index was 0.99 per cent higher at 6,387.12. “Market was in an oversold territory and we witnessed a technical bounce-back. Another factor that lifted the positive sentiment was cooling of crude oil prices,” said Arpit Agrawal, head of research, Arihant Capital Markets. Traders covered positions in over-beaten interest-sensitive sectors like banking and real estate. Buying was also seen in capital goods stocks. Steel counters sulked on fear of government initiative to cap prices. Market discounted inflation, which was expected to be above 12 per cent. “Market will remain volatile till vote of confidence is passed. Otherwise, fundamentally things have not changed much,” Agrawal added. Biggest Sensex gainers were HDFC (9.78%), Maruti Suzuki (9.46%), Jaiprakash Associates (9.19%), DLF (8.44%), Larsen & Toubro (7.49%) and State Bank of India (7.75%). Losers comprised Ranbaxy Laboratories (-3.93%) and Tata Steel (-2.92%). Market breadth remained positive through the day. On BSE, 1,536 advances outnumbered 1,081 declines. In Europe, stocks were buoyant cheering crude’s fall. The FTSE 100 was up 2.34 per cent, DAX 30 rose 2.33 per cent and CAC 40 added 2.76 per cent. Oil prices fell on concerns slowing US economic growth would hurt crude demand. Light sweet crude forAugust delivery, dipped 42 cents to $134.18 per barrel. Friday, market will cheer a marginal rise in domestic inflation to 11.91 per cent in the week to July 5 from 11.89 per cent in the previous week. Finance Ministry’s statement that inflation has stabilized will further lift investor sentiment. 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