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What if US exports oil?
Fri, 7 Dec Pre-Open

Just a few days ago, it was reported that US is all set to become the largest oil producing nation by the end of this decade. Improved technologies as well as huge shale gas reserves are expected to drive the nation's oil production capacities. Currently the US is a net importer of oil. But with the rise in production, it is touted to become a net exporter of oil when this happens. An article by Firstpost discusses as to how this would affect India.

The impact on India would be in two fold. The first would obviously be on its energy policy. The increase in supply of oil would eventually lead to oil prices stabilizing. This would bring some relief to the oil importing countries like India. The extreme volatility in oil prices that we have seen in recent times have badly affected our fiscal deficit. It did not bode well for the industries either who saw their margins fluctuate wildly as oil prices went all over the place. The caveat in this expectation is obviously that US does not curb its exports of oil.

The second impact would be on the US economic standing. With the export of oil, the country would be able to bring its fiscal deficit under control. This in turn would help boost the value of the US dollar which has been seeing dark times off late. This improvement in US dollar would most certainly help US gain back its economic supremacy which has come under attack since the onset of the crisis. Another impact of a strengthening US dollar would be on the commodity prices. Most prominently on the price of gold. Thanks to the crisis that has currently gripped the world, gold has been witnessing a stellar run owing to its 'safe haven' status. But it must be remembered that gold and US dollar usually move in opposite directions. IF US dollar strengthens the prices of gold should come down.

As we can see if and when US does turn into an oil exporting nation, there would be a shift of power at least in economic terms. Indian policy makers would do well to keep this in mind and prepare accordingly from now itself. Otherwise they would very well end up in an awkward position when this happens.

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Feb 23, 2018 (Close)