India may save $17 bn on oil fall

India is expected to save about USD 17 billion this fiscal on crude oil import bill due to fall in crude oil prices, currently hovering between USD 110-120 per barrel after nearly touching USD 150 per barrel mark, a study said. According to the industry body Assocham's Eco Pulse study on 'Crude Economics', the oil import bill for the current fiscal would have soared to USD 125 billion had crude oil prices remained at USD 145 per barrel level.

However, with the reversal in price movement, the import bill for crude oil would be restrained to USD 108 billion, it said.
Although, experts are still not sure whether the crude price decline would sustain in coming months, but so far it has shed almost 25 per cent after peaking to an all time high of USD 147.27 per barrel in July this year.

The study noted that 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 chamber said.

In April-June this year, India's oil import bill stood at 25.5 billion dollars against 17 billion dollars during the corresponding period last year.
Fall in oil import bill will also help the government to bridge the trade deficit which rose to 30.4 billion dollars in the first three months of this fiscal.

The OECD-European countries have also registered a slowdown in demand from 15.28 mbpd in 2007 to 15.24 mbpd in the first quarter of this year.
Softening crude oil prices may come as a respite to the burgeoning current account deficit 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 08 stood at a whopping USD 25.5 billion on top of USD 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, Assocham President Sajjan Jindal said.
Strengthening dollar has also played its role in cooling down the crude prices. The greenback has appreciated by as much as 6 per cent versus Euro in the last three months.

-economic times