Study of impact of oil price volatility on different economies

Abstract

Crude oil has seen much volatility in the last 5 years i.e. a peak of around $ 130 a dollar in 2009 to around $ 50 per barrel at present. Price movement of oil affects different nations in different ways for example a lower oil price helps India in keeping its subsidy bills low, checks the inflation and may even boost the business. However, lower oil prices might hurt the growth of oil exporting nations like Saudi Arabia. In an insular world these statements might be correct. However, in a world connected through trade, a bad Middle Eastern economy of Saudi Arabia might affect India’s exports. Therefore, we believe that a well-grounded study of effects of oil price movement on different sets of countries viz. oil exporting, oil importing and oil importing as well as oil producing nations would help understand the impact of oil prices on the macroeconomic environment affecting the business. In this report we have tried to analyze the various channels of oil price impact on different macroeconomic factors of an economy. We have also tried to find the co-relation between changes in oil prices with macro factors like Real GDP growth, inflation & exchange rates. At the same time we have tried to ascertain the impact of oil price volatility on both oil-exporting and oil-importing countries.