Impact of increasing crude OIL prices on Indian industries.

Essay by er.pc January 2006

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Impact of increasing crude OIL prise on Indian industries.

India is an energy importing country, primarily of oil and soon of gas. Its imports are growing while its domestic production lags behind the fast pace of demand growth. The Indian government is conscious of the need to diversify its sources of supply and also to boost domestic supply of primary energy as well as final products (LPG, kerosene, natural gas, lubes, etc.). On the exploration and production front, developments are slow. They reflect in part the state of India's oil and gas reserves: mature fields, limited reserves or costly new developments. The response on the front of products is better and India's refining capacity is growing rapidly. Similarly, public and private companies are investing large amounts in the development of LNG terminals in order to be the first able to capture part of the Indian gas market.

This has a number of implications:

1. India's energy security is at stake and the country could play a leading role among developing countries

to set up emergency preparedness mechanisms.

2. The need for reforms in the oil sector is all the more pressing to improve resource allocation for

investments and rationalise consumption. In the gas sector, and in particular in the LNG sector, a gas

policy is yet to be defined, facilitating firms' investments.

3. Last but not least, a growing consumption of oil and gas translates into larger CO2 emissions. Though

India's emissions per capita are among the lowest in the world, total Indian emissions are already large

and growing rapidly, in particular from the consumption of oil and gas, but also from coal combustion5.

Power production from gas could provide a lower emission production trend than from coal, providing

Sufficient investments are available to be carried out.


Oil accounts...