Tag Archives: oil prices

Recession in the United States?

Newsroom24x7 Desk

Fitch RatingsNew York City:  For an incisive perspective on

1.What is the impact of lower oil prices on investment spending for the global economy?

2.Growth expectations for China?

3.The Fitch perspective on monetary policy in advanced economies outside the U.S.?

Listen: Recession in the United States? (9 minute podcast) James McCormack, Global Head of Sovereigns and Brian Coulton, Fitch Chief Economist discuss a few of the major themes in the global economy, including the risk of recession in the United States among others.
This follows the release of the Global Economic Outlook – May 2016

Comments recorded on Thursday 26th May 2016

Second hike in petrol, diesel prices within a fortnight

Newsroom24x7 Staff

oil price hikeNew Delhi: People across India received a huge shock on Friday evening as Petrol and diesel prices were hiked for the second time within a fortnight. Petrol prices were raised today by 3.13 per litre and diesel prices by Rs 2.71 per litre.

Since taxes and levies differ from state to state, people will have to shell out much more than what has been projected by oil companies in terms of the latest price hike.

A statement by Indian Oil today said:

It has been decided to effect the following price changes with effect from midnight of 15th / 16th May, 2015:

• Increase in Retail Selling Price of Petrol by Rs. 3.13/litre at Delhi (including State levies) with corresponding price revision in other States. With this change, the price of Petrol in Delhi will become Rs. 66.29/litre.

• Increase in Retail Selling Price of Diesel (Retail) by Rs. 2.71/litre at Delhi (including State levies) with corresponding price revision in other States. With this change, the price of Diesel in Delhi will become Rs. 52.28/litre.

Prices of Petrol and Diesel were last revised w.e.f. May 1, 2015. Since last price change, there has been a steep increase in international prices of both Petrol & Diesel. INR-USD exchange rate has also depreciated quite significantly during this period. Combined impact of both these factors warrant an upward revision in prices, the impact of which is being passed on to the consumers with this price increase.

The movement of prices in international oil market and INR-USD exchange rate shall continue to be monitored closely and developing trends of the market will be reflected in future price changes

In contrast, the Union Ministry of Petroleum and Natural Gas today said in a statement that The international crude oil price of Indian Basket as computed/published today (May 14, 2015) by Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas was US$ 64.88 per barrel (bbl). This was lower than the price of US$ 65.70 per bbl on previous publishing day of May 13, 2015.

In rupee terms, the price of Indian Basket decreased to Rs 4141.94 per bbl on May 14 as compared to Rs 4217.28 per bbl on May 13. Rupee closed stronger at Rs 63.84 per US$ on May 14 as against Rs 64.19 per US$ on May 13. The table below gives details in this regard:

Particulars Unit Price on May 14, 2015(Previous trading day i.e. 13.05.2015) Pricing Fortnight for 01.05.2015

(April 11 to April 28, 2015)

Crude Oil (Indian Basket) ($/bbl) 64.88              (65.70) 60.30
(Rs/bbl 4141.94          (4217.28) 3789.86
Exchange Rate (Rs/$) 63.84              (64.19) 62.85

 

 

Oil Price hike: People in India are feeling the pinch

Newsroom24x7 Desk

oild pricesNew Delhi/Bhopal: After two successive cuts in recent days, petrol prices were hiked by Rs 3.96 per litre and diesel by Rs 2.37 a litre and the new rates became effective from past midnight.

Oil rates were slashed by 80 paise per litre on petrol and Rs 1.30 a litre on diesel on April 16. Earlier there was a decrease by 49 paisa in the price of petrol and Rs 1.21 in diesel prices from April 2. The latest hike has taken away the relief people got as a result of the price cuts. People filling gas at a petrol pump Bhopal, capital of the Central Indian State of Madhya Pradesh this morning were heard mocking the “Acche Din” slogan of the in .

Global crude oil price of Indian Basket was US$ 62.25 per bbl on April 24, 2015 

The international crude oil price of Indian Basket as computed/published on April 30 by Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas was US$ 62.25 per barrel (bbl) on 29.04.2015. This was higher than the price of US$ 61.86 per bbl on previous publishing day of 28.04.2015.

In rupee terms, the price of Indian Basket increased to Rs 3934.20 per bbl on April 29 as compared to Rs 3917.59 per bbl on April 28. Rupee closed stronger at Rs 63.20 per US$ on 29.04.2015 as against Rs 63.33 per US$ on April 28.

The table below gives the details:

 

Particulars Unit Price on April 29, 2015(Previous trading day i.e. 28.04.2015) Pricing Fortnight for 16.04.2015(March 28 to April 10, 2015)
Crude Oil (Indian Basket) ($/bbl) 62.25              (61.86) 54.92
(Rs/bbl 3934.20          (3917.59) 3425.91
Exchange Rate (Rs/$) 63.20              (63.33) 62.38

 

Excessively strong rupee is undesirable: Raghuram Rajan

 Reverse repo rate under the liquidity adjustment facility (LAF) stands adjusted to 6.5 per cent with immediate effect

Newsroom24x7 Desk

raguram rajanMumbai: Reserve Bank of India Governor Raghuram G Rajan today issued a statement on Monetary Policy which draws attention to the RBI statement on monetary policy of January 15, 2015 to announce the decision to reduce the policy repo rate by 25 basis points and indicate that ““Key to further easing are data that confirm continuing disinflationary pressures.

Dr. Rajan states: “also critical would be sustained high quality fiscal consolidation…”.While maintaining the interest rate stance in its sixth bi-monthly monetary policy statement of February 3 in the absence of new developments on inflation or on the fiscal outlook till then, the Reserve Bank indicated that it will keenly monitor the revision in the consumer price index (CPI) with regard to the path of inflation in 2015-16 as well as the Union Budget for 2015-16.

Data Developments

Today’s statement by the RB Governor goes to point out that the new CPI rebased to 2012 was released on February 12, 2015. Inflation in January 2015 at 5.1 per cent as measured by the new index was well within the target of 8 per cent for January 2015. Prices of vegetables declined and, hearteningly, inflation excluding food and fuel moderated in a broad-based manner to a new low. Thus, disinflation is evolving along the path set out by the Reserve Bank in January 2014 and, in fact, at a faster pace than earlier envisaged.

The RBI Governor goes on the add:

The uncertainties surrounding any inflation projection, according to Dr.Rajan,are not insignificant. Oil prices have firmed up in recent weeks, and significant further strengthening, perhaps as a result of unanticipated geo-political events, will alter the inflation outlook. Other international commodity prices are expected to remain benign, given still-sluggish global demand conditions. Food prices will be affected by the seasonal upturn that typically occurs ahead of the south-west monsoon and, therefore, steps the government takes on food management will be critical in determining the inflation outlook. Finally, the possible spill over of volatility from international financial markets through exchange rate and asset prices channels is also still a significant risk.

Perhaps the most significant influences on near-term inflation will be the strength of aggregate demand relative to available capacity. Two recent developments pertaining to the demand-supply balance are the recently-released GDP estimates and the Union Budget for 2015-16.

The Central Statistical Organisation is to be commended on the changes it has made to the methodology of estimating GDP, bringing India up to international best practice. Yet the picture it presents of a robust economy, with growth having picked up significantly over the last three years, is at odds with still-low direct measures of growth of production, credit, imports and capacity utilisation as well as with anecdotal evidence on the state of the economic cycle. Nevertheless, the picture of a steadily recovering economy appears right.

The fiscal impulses in the Union Budget then assume importance. There are many important and valuable structural reforms embedded in this Budget, which will help improve supply over the medium term. In the short run, however, the postponement of fiscal consolidation to the 3 per cent target by one year will add to aggregate demand. At a time of accelerating economic recovery, this is, prima facie, a source for concern from the standpoint of aggregate demand management, especially with large borrowings intended for public sector enterprises.

Some factors mitigate the concern. The government has emphasized its desire to clean up legacy issues which gave a misleading picture of the true extent of fiscal rectitude, and has also moderated the optimism in its projections. To this extent, the true quantum of fiscal consolidation may be higher than in the headline numbers. Also, the government is transferring a significantly larger amount to the states, without entirely devolving responsibility for funding central programmes. To the extent that state budget deficits narrow, the general fiscal deficit will be lower. Furthermore, supported by lower international energy prices, there is a welcome intent to shift from spending on subsidies to spending on infrastructure, and to better target and further reduce subsidies through direct transfers. Finally, the central government has signed a memorandum with the Reserve Bank setting out clear inflation objectives for the latter. This makes explicit what was implicit before – that the government and the Reserve Bank have common objectives and that fiscal and monetary policy will work in a complementary way. In sum, then, the government intends to compensate for the delay in fiscal consolidation with a commitment to an improvement in the quality of adjustment.

Of course, all these mitigating factors have a fair component of intent. The realised net fiscal impulse will depend on both central and state government actions going forward.

Finally, the rupee has remained strong relative to peer countries. While an excessively strong rupee is undesirable, it too creates disinflationary impulses. It bears repeating here that the Reserve Bank does not target a level for the exchange rate, nor does it have an overall target for foreign exchange reserves. It does intervene on occasion, in both directions, to reduce avoidable volatility in the exchange rate. Any reserve build-up is a residual consequence of such actions rather than a direct objective.

Policy Stance

To summarise, softer readings on inflation are expected to come in through the first half of 2015-16 before firming up to below 6 per cent in the second half. The fiscal consolidation programme, while delayed, may compensate in quality, especially if state governments are cooperative. Given low capacity utilisation and still-weak indicators of production and credit off-take, it is appropriate for the Reserve Bank to be pre-emptive in its policy action to utilise available space for monetary accommodation.

Consequently, it has been decided to:

reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.75 per cent to 7.5 per cent with immediate effect;

keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities (NDTL);

continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system through auctions; and

continue with daily variable rate repos and reverse repos to smooth liquidity.

Consequently, the reverse repo rate under the LAF stands adjusted to 6.5 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 8.5 per cent with immediate effect.

The need to act outside the policy review cycle is prompted by two factors: First, while the next bi-monthly policy statement will be issued on April 7, 2015 the still weak state of certain sectors of the economy as well as the global trend towards easing suggests that any policy action should be anticipatory once sufficient data support the policy stance. Second, with the release of the agreement on the monetary policy framework, it is appropriate for the Reserve Bank to offer guidance on how it will implement the mandate.

Going forward, the RBI will seek to bring the inflation rate to the mid-point of the band of 4 +/- 2 per cent provided for in the agreement, i.e., to 4 per cent by the end of a two year period starting fiscal year 2016-17.

The guidance on policy action given in the fifth-bi-monthly monetary policy statement of December 2014 is largely unchanged. Further monetary actions will be conditioned by incoming data, especially on the easing of supply constraints, improved availability of key inputs such as power, land, minerals and infrastructure, continuing progress on high-quality fiscal consolidation, the pass through of past rate cuts into lending rates, the monsoon outturn and developments in the international environment.