The falling price of crude has spread jitters across the world. A weak growth in the global oil demand, the current excess supply and the ever-growing production of shale gas in the US seem to have combined to bring about the 50 per cent decline in crude since the highs of $107 per barrel in June 2014.
Where will crude trend? By current indications, low crude prices are here to stay. "We're never going to see $100 anymore," told Prince Alwaleed bin Talal, the billionaire Saudi businessperson, recently to CNBC, referring to the $100 per barrel price marker that crude had stayed above.
Crude at $50 per barrel is really nothing out of the ordinary, according to research by Ruchir Sharma of Morgan Stanley Investment Management, based on the hindred-year average price of crude. Ruchir also reminds us that crude breached the $50 mark only about a decade back.
That is not all. Commodity prices tend to rise for a decade then fall for two decades is the most startling discovery Sharma makes in a research that goes back 200 years. What accounts for this behaviour is the emergence of alternatives that cap the prices of commodities. In recent times, shale gas has emerged as a viable alternative to crude.
If crude does indeed stay low, that's good news for a net oil importer like India. We import 70 per cent of our oil requirements. A low crude is also good for a number of industries that use crude or its derivatives in some form or the other - industries like oil-marketing companies, paints and lubricants. Over the next few days, we will feature here some of the biggest gainers from the slump in crude.