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from Expert Zone:

The benefits of falling oil prices for India

(Any opinions expressed here are those of the author and not necessarily those of Thomson Reuters)

The fall in global oil prices couldn’t have come at a more opportune time for India. In August, oil imports dropped 15 percent year-on-year, driven primarily by a fall of $10 per barrel in prices. Brent has fallen below $100 over the past month, and could slip further. Increasing supplies from the United States and slowing demand are contributing to the weakness in prices.

This offers India several benefits. First, the scope for elimination of diesel subsidy. While the government has been steadily increasing the retail price of diesel in the domestic market, the fall in oil prices has nearly wiped off the need for subsidised support. Assuming the rupee stays stable, the government has a golden opportunity to market-link diesel prices.

Secondly, this would help tame inflation. Falling fuel prices have a direct effect on inflation, whereas indirectly they lower production costs for firms with petroleum-based primary input. Many industries such as paints and packaging are beneficiaries. While we can expect companies from these sectors to retain part of the gains, the rest will get passed on downstream and help lower inflation.

from Breakingviews:

New oil dynamics may challenge crude growth logic

By Christopher Swann and Kevin Allison 

The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Fears for the wobbly world economy have pushed Brent crude below $100 a barrel for the first time since July. Long-term trends at work in the oil market mean it could stay depressed. That’s good, since cheaper energy helps industry. Better still, booming shale output, greater efficiency and the rise of natural gas as a rival transport fuel may keep the oil price subdued even as growth is stimulated.

from Global Investing:

Is the rouble overhyped?

For many months now the Russian rouble has been everyone's favourite currency. Thanks to all the interest it rose 4 percent against the dollar during the July-September quarter. How long can the love affair last?

It is easy to see why the rouble is in favour. The central bank last month raised interest rates to tame inflation and might do so again on Friday. The  implied yield on 12-month rouble/dollar forwards  is at 6 percent -- among the highest in emerging markets.  It has also been boosted by cash flowing into Russian local bond market, which is due to be liberalised in coming months. Above all, there is the oil price which usually gets a strong boost from Fed QE.  So despite worries about world growth, Brent crude prices are above $110 a barrel. Analysts at Barclays are among those who like the rouble, predicting it to hit 30.5 per dollar by end-2012, up from current levels of 31.12.

from Breakingviews:

Saudi’s foreign aid bill piles up

By Una Galani

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Saudi Arabia’s foreign aid bill is mounting. Egypt Jordan, Bahrain, Oman and Yemen - the Arab spring has elicited a string of pledges of loans and grants from the oil-rich kingdom to its troubled, resource-poor neighbours.

from Breakingviews:

Euro zone powerless to avoid big oil divide

By Kevin Allison and Christopher Swann

The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Higher oil prices are yet another force pushing the euro area’s economies apart. They hit gross domestic product three times harder in Greece than in Germany, according to data from Moody’s Analytics. Ireland and Italy are big losers, too. With Iran worries driving prices higher and sovereign debt fears flaring up again, governments may be even more tempted to tap strategic petroleum reserves. But that won’t guarantee lower prices.

from Breakingviews:

Pricey exploration means dear oil is here to stay

By Christopher Swann and Kevin Allison

The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Gas guzzlers may wait in vain for a return to cheap oil. Big producing nations like Saudi Arabia, which handed out cash to restive citizens during last year’s Arab Spring, need higher oil prices to balance their books. Meanwhile, a three-fold increase in the costs associated with extracting crude over the past decade has made expensive oil more a necessity than a luxury for energy firms, according to a Morningstar study. Put the two trends together and it looks like dear oil is here to stay.

from Breakingviews:

Saudi words won’t ease pressure on U.S. fuel prices

By Una Galani
The author is a Reuters Breakingviews columnist. The opinions expressed are her own

Saudi Arabia can't easily relieve Barack Obama's fuel price misery. The kingdom's assurances that it can and is willing to increase oil supply in the event of a shortage won't do much to lower U.S. fuel prices, which are reaching risky levels ahead of presidential elections in November. In fact, the options for the world's biggest oil supplier to rein in runaway crude are all imperfect.

from Breakingviews:

ECB cash palliates crisis but drives up oil price

By Ian Campbell

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

One trillion euros in European Central Bank cash has poured like a balm onto the euro zone’s stormy waters – and helped drive up the global oil price. ECB liquidity cannot solve the euro zone crisis and comes with major risks.

from Breakingviews:

Higher oil price should burn itself out

By Kevin Allison

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

If $120 a barrel Brent crude is a threat to the global economy, someone had better tell the stock market. The MSCI World Index has largely kept pace with the rising price of oil this year. For now, stronger-than-expected economic growth appears to be overshadowing equity investors’ concerns about tight supplies of oil. Worries about Iran may keep trading volatile. But absent a serious flare-up in the Persian Gulf, any spike in crude prices should be mostly self-correcting.

from Breakingviews:

Iran sanctions’ impact could prove slippery

By Kevin Allison
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Iran’s rulers are feeling the heat. The Islamic Republic was forced to prop up its currency on Jan. 4, just days after the U.S. imposed tough new sanctions to goad it into abandoning its nuclear weapons programme. A European curb on Iranian crude imports would add to pressure on Tehran ahead of elections in March.

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