TASK 6

Submitted By
Victor Joseph

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CRUDE OIL AND GEOPOLITICAL TENSIONS
Geopolitical tensions can play a significant role in influencing crude oil prices through a
complex interplay of supply and demand:

Supply Disruptions:
Risk Premium: Increased tensions in major oil-producing regions like the Middle East raise
concerns about potential disruptions to supply. This perception pushes traders to buy more
oil, increasing prices in anticipation of future scarcity.

Demand Shocks:
Economic Uncertainty: Geopolitical instability can damage global economic activity.
Businesses and consumers become hesitant to invest and spend, leading to decreased oil
demand.

Examples:
The ongoing conflict between Russia and Ukraine is a recent example. While the EU and G7
nations-imposed sanctions on Russian oil, Russia managed to divert exports to Asia, leading
to a less significant impact than initially expected.

Global Economic Factors:

Growth Outlook: A strong global economy with rising demand for goods and services
translates to higher demand for oil, pushing prices up. Conversely, a weak global economy
can depress oil prices.

China's Economy: China, the world's second-largest oil consumer, has been experiencing
economic challenges. This has limited the growth in global oil demand and put downward
pressure on prices.

US Federal Reserve Policy: The US Federal Reserve's interest rate decisions can influence oil
demand. Lower interest rates stimulate economic growth, increasing oil demand and prices.

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Domestic Economic Factors (for India):

Rupee Exchange Rate: A volatile rupee can impact the landed cost of imported oil for India.
A weaker rupee makes imports more expensive, increasing domestic oil prices.

Current Market: As of May 22, 2024, oil prices face downward pressure despite geopolitical
tensions. This is due to the weaker global growth outlook and increased US oil production.

Overall, geopolitical tensions are just one-factor influencing crude oil prices. The interplay
between global and domestic economic factors also plays a significant role in determining the
final price.

TOP FIVE CRUDE OIL PRODUCERS

Country Continent Oil production December

2023 (bbl/day)

United States North America 13,295,000

Russia Europe/Asia 10,126,000

Saudi Arabia (OPEC) Asia 8,950,000

Canada North America 4,971,000

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TOP FIVE CONSUMER SOF CRUDE OIL

Daily Oil
Country Consumption World share Yearly Gallons Per
Capita

United States 19687287 20.3% 922.4

China 12791553 13.2% 139.9

India 443000 4.6% 50.9

Japan 4012877 4.1% 484.4

Russia 3631287 3.7% 383.6

IMPACT ON INDUSTRY

1. Asian Paints (Paint Industry)

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The graph shows Asian Paints' yearly sales growth from 2020 to 2024. The company's
revenue in 2020 was 20,211 units (probably millions), and in 2021 it recorded 21,712 units, a
7.4% increase. In 2022, this growth was more pronounced, with sales rising to 29,101, a 34%
increase over the previous year. Revenue increased to $34,488 by 2023, a 19% increase. The
estimated revenue for 2024 is $35,494, a relatively moderate 2.9% increase. In general,
revenue of Asian Paints is projected to increase by roughly 75.6% between 2020 and 2024.
This continuously growing trend highlights the company's outstanding performance and
effective business tactics. Still, the growth rate's minor decline in 2024 may indicate that the
market is stabilizing or becoming close to saturation.

Crude oil prices of last 4 years

The graph shows the changes in crude oil prices between January 2020 and January 2023.
Until the middle of 2020, the price was comparatively consistent at about 40 units (probably
$ per barrel). Then, it suddenly increased, shooting up to about 60 units. This higher price
point continued upward throughout 2021, culminating in about 70 units by year's end. There
was a notable jump in pricing at the beginning of 2022, rising to around 120 units, suggesting
a significant market event or a supply disruption. However, This high was temporary,
dropping prices to about 80 units. Prices exhibited some volatility in the latter half of 2022
and the first part of 2023, ranging from 80 to 90 units. Overall, the graph shows a relatively
stable period in 2020, steady growth in 2021, a notable peak in early 2022, and turbulence,
reflecting the crude oil market's volatile and frequently erratic behavior during these years.
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COMPARISON OF ASIAN PAINTS AND CRUDE OIL PRICES

The crude oil industry is marked by high price volatility and unpredictability, in contrast to
Asian Paints' consistent and predictable history of revenue development. Asian Paints
experiences a steady rise indicative of ongoing demand and efficient management, resulting
in a 75.6% increase in total revenue within the time frame. However, there are significant ups
and downs in the price of crude oil due to its extreme sensitivity to outside influences
including market speculation, supply chain interruptions, and geopolitical events.

This comparison emphasizes the disparities in these industries' dynamics and challenges. The
steady and progressive rise of Asian Paints points to a more stable market environment. In
contrast, the volatile price fluctuations of the crude oil market highlight its vulnerability to
sudden and frequently unanticipated changes. There may be a domino effect from the oil
market's current instability. Industries that depend on oil may be negatively impacted by the
oil market's volatility, but Asian Paints' steady revenue growth indicates a more stable and
controlled business climate.

2. Apollo (Tyre industry)

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This graph presents various financial metrics for a company over 5 years, from 2020 to 2024.
The primary metric displayed is the company's revenue, which shows a consistent upward
trend, growing from around 16,327 in 2020 to a projected 25,377 in 2024. This steady
increase in revenue suggests that the company's business operations and sales have been
expanding successfully during this timeframe.

COMPARISON OF APOLLO AND CRUDE OIL PRICES

The Apollo Tyres chart depicts a positive internal development, showcasing a year-on-year
increase in net profit from 2022 to 2023. This suggests strong company performance. In
contrast, the crude oil price chart portrays external market volatility. While it indicates a
period of relative stability in 2020, it highlights a significant price surge in early 2022,
followed by a drop and continued fluctuations. This volatility could impact companies like
Apollo Tyres, as crude oil is a key material in tire production.

3. FedEx (Logistics)
FedEx's financial performance over the last four years (2020-2023) paints a mixed picture.
While revenue boomed in 2021 with a 21.3% increase, it has since dipped in 2022 (3.59%)
and again in 2023 (5.51%). This decline can be attributed to several factors, including
weakening global demand for deliveries, particularly in FedEx Express, their core segment.
Additionally, rising operational costs due to inflation have squeezed profits. However, some
sources report positive year-over-year growth in net income for 2023, suggesting FedEx may
be taking steps to mitigate these challenges, such as cost-cutting measures and focusing on
domestic deliveries with higher yields.

COMPARISON OF FEDEX AND CRUDE OIL PRICES

There is a contrast between FedEx's recent financial performance and crude oil prices. While
FedEx enjoyed a revenue surge in 2021, coinciding with rising oil prices, its revenue has
since dipped despite a volatile oil market in 2022 and 2023. This suggests factors beyond fuel
costs, such as weakening global demand, are likely playing a more significant role in FedEx's

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revenue decline. Interestingly, reports of rising net income in 2023 indicate FedEx might be
taking internal measures to address these challenges.

4. Emirates Airlines (Aviation sector)

Global oil prices, a key revenue source, likely boosted the UAE's finances in 2021 after
relative stability in 2020. However, volatility in oil prices since then might have introduced
uncertainty. The UAE's ongoing economic diversification efforts, focusing on sectors like
tourism and technology, would have also played a role in the overall financial health of the
Emirates in recent years.

COMPARISON OF EMIRATES AND CRUDE OIL PRICES

The UAE likely enjoyed a financial windfall in 2021, as evidenced by the surge in oil prices
following a period of stability in 2020. This aligns with the graph's depiction of steadily
rising oil prices throughout 2021. However, the UAE's financial picture might be less clear-
cut since then. The graph shows significant volatility in oil prices in 2022 and early 2023,
which could introduce uncertainty for the UAE's budget. This suggests the UAE's economic
diversification efforts, aimed at sectors like tourism and technology, might be playing an
increasingly crucial role in ensuring long-term financial stability, even with the fluctuations
of the oil market.

5. Bharat Petroleum Corporation Limited's (BPCL) (Petroleum Industry)

Bharat Petroleum Corporation Limited's (BPCL) financial performance over the past four
years (2020-2023) has been a story of ups and downs. While specific sales data is limited,
profitability seems to have fluctuated. A potential one-time gain in 2021, possibly from a
subsidiary sale, might explain the high reported profit that year. Information suggests
profitability in 2023 may be lower than in 2021 but potentially higher than in 2020. On a
positive note, BPCL has reportedly been reducing debt, which benefits long-term financial
health. Global oil price swings are a likely culprit behind the profit fluctuations, impacting
BPCL's refining margins. The surge in 2021 could have been a boon, while the volatility in

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2022 and 2023 might have presented challenges. BPCL's efforts to improve operational
efficiency could counter these price fluctuations.

COMPARISON OF BPCL AND CRUDE OIL PRICES

The graph depicts a rise in oil prices throughout 2021, aligning with BPCL's potentially high
profit that year, which could be due to a one-time gain but might also be influenced by
favorable refining margins from these higher prices. The oil price volatility in 2022 and 2023
coincides with BPCL's seemingly lower profitability in 2023 compared to 2021. This
suggests BPCL's profits might be sensitive to oil price swings. However, BPCL's reported
debt reduction efforts are a positive sign for long-term financial health, potentially helping
them navigate these external market fluctuations

RUSSIA UKRAINE WAR

 Historical Context: Russia and Ukraine have had a tangled relationship for
generations. Ukraine has historically been a part of several Russian and Soviet states,
resulting in complex cultural, economic, and political relations. However, Ukrainian
nationalism and ambitions for independence have also played important roles, notably
following the Soviet Union's breakup in 1991.
 Euromaidan Protests: The conflict escalated in 2014 following the Euromaidan
protests in Ukraine, which led to the ousting of pro-Russian President Viktor
Yanukovych. Yanukovych's removal was seen as a setback for Russia, which had
supported his government, and increased tensions between Russia and the new pro-
Western Ukrainian government.
 Crimea Annexation: In February 2014, Russia took control of Crimea, a peninsula in
southern Ukraine with a predominantly ethnic Russian population. The international
community heavily opposed this decision, and Russia used a contentious referendum
in Crimea as justification for annexation. However, the majority of the international
community, including Ukraine and Western countries, denied the referendum's
legality and continued to consider Crimea a part of Ukraine.
 Conflict in Eastern Ukraine: Following the annexation of Crimea, pro-Russian
separatist movements emerged in eastern Ukrainian regions, particularly Donetsk and

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 Luhansk, leading to an armed conflict between Ukrainian forces and separatist rebels.
The conflict, which ceasefires and violations have marked, has resulted in thousands
of casualties and widespread destruction in the region.
 International Response: The crisis has strained relations between Russia and the West,
with the European Union and the United States adopting economic sanctions against
Russia. Diplomatic efforts to end the conflict, mainly through the Minsk agreements
brokered by France, Germany, Russia, and Ukraine, have had minimal success in
establishing a long-term truce and political settlement.
 Humanitarian Crisis: The conflict has had a devastating impact, with millions of
people displaced from their homes and needing humanitarian assistance. Both sides
have been accused of human rights abuses, including targeting civilians and
restricting access to humanitarian aid.
 Geopolitical repercussions: The Russia-Ukraine conflict has far-reaching geopolitical
repercussions, influencing Russia-Ukraine ties and European security dynamics. It has
heightened tensions between Russia and NATO, raising concerns about Eastern
European security and regional stability.

ISRAEL IRAN ISSUE

 Historical Background: The animosity between Israel and Iran can be traced back to
the 1979 Islamic Revolution in Iran, which overthrew the Shah's regime and
established an Islamic Republic. Since then, Iran's government, particularly under
Supreme Leader Ayatollah Ali Khamenei, has adopted an anti-Israel stance, often
referring to Israel as the "Zionist regime" and supporting Palestinian militant groups
opposed to Israel, such as Hamas and Hezbollah.
 Iran's nuclear program has been a critical point of dispute between the two countries
and the international community. Israel has expressed grave concerns over Iran's
nuclear ambitions, claiming that a nuclear-armed Iran would represent an existential
threat. Iran has repeatedly declared that its nuclear program is for peaceful objectives,
such as energy production, but questions linger regarding its aims.
 Regional Proxy Conflicts: Israel and Iran have been involved in proxy conflicts across
the Middle East, particularly in Syria, Lebanon, and the Gaza Strip. Iran provides
support to militant groups like Hezbollah in Lebanon and Hamas in Gaza, both of
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 which have engaged in armed conflict with Israel. Additionally, Iran's military
presence in Syria, aimed at propping up the Assad regime, has heightened tensions
with Israel, leading to occasional military clashes.
 Israeli Security Concerns: Iran is viewed as a substantial danger to Israeli security due
to its support for militant groups, nuclear program, and anti-Israel rhetoric. Israel has
often warned about Iran's rising regional influence, and it has taken military action to
block what it regards as Iranian plans to create military facilities or transfer advanced
weaponry to proxies near Israel's borders.
 Geopolitical forces: The competition between Israel and Iran is driven by larger
geopolitical forces in the Middle East. Israel has tight ties with the United States and
other Sunni Arab states, like Saudi Arabia and the United Arab Emirates, which are
concerned about Iran's regional ambitions. Iran, on the other hand, has worked to
increase its influence and oppose Israel's presence in the area by forming ties with
Shia groups and governments such as Syria and Hezbollah.
 Diplomatic Efforts and Negotiations: Despite the tensions, there have been sporadic
diplomatic efforts to ease tensions between Israel and Iran, particularly regarding
Iran's nuclear program. The 2015 Joint Comprehensive Plan of Action (JCPOA), also
known as the Iran nuclear deal, aimed to limit Iran's nuclear activities in exchange for
sanctions relief. However, Israel strongly opposed the JCPOA, arguing that it did not
go far enough in preventing Iran from obtaining nuclear weapons.

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