ECONOMICS PROJECT
NATIONAL LAW UNIVERSITY ODISHA
PROJECT WORK ON THE CORRELATION BETWEEN FLUCTUATIONS IN CRUDE
OIL PRICES AND SHIFTS IN CONSUMPTION BEHAVIOURS.
SUBMITTED BY –
Raghav Pruthi (075)
3rd Semester
Batch of 2022-27
SUBMITTED TO-
Ms. Madhubrata Ray Singh
ACKNOWLEDGEMENT
“I would like to express my gratitude and appreciation to all those who helped them complete
this project. A special thanks to the subject teacher of Macroeconomics Madhubrata Ray
Singh, who gave me the opportunity to work on the project topic “THE CORRELATION
BETWEEN FLUCTUATIONS IN CRUDE OIL PRICES AND SHIFTS IN
CONSUMPTION BEHAVIOURS”. I thank her for her help, in stimulating suggestions and
encouragement which led to the successful completion of the project. Without her help the
completion of the project was not possible. I also acknowledge the “IT Department of
NLUO”, for providing us with access to databases, which helped us get the information for
the research project.
PREFACE
As part of the National Law University Odisha curriculum and in order to gain regards to
Macroeconomics the researcher was required to make a project reviewing the topic “THE
CORRELATION BETWEEN FLUCTUATIONS IN CRUDE OIL PRICES AND
SHIFTS IN CONSUMPTION BEHAVIOURS” The basis and goal behind this study was
to gain knowledge about the various aspect of Relationship between consumption pattern of
crude oil. In this project, the researcher has included the studies of various scholars and
political scientists regarding the same. During this project helped me to enhance my
knowledge related to Macroeconomics and explore various aspects of Economics.
INTRODUCTION
The world heavily relies on crude oil, which acts as the primary energy source across various
industries. The increasing demand for crude oil has made its price a significant factor
influencing the pace of the global economy. The recent volatility in crude oil prices has
brought about significant changes in the global economy, impacting businesses and consumer
behavior in different ways. As a result, consumers have adjusted their spending habits in
response to the rapid surge in crude oil prices.
To understand the shifts in consumer behavior and spending patterns before and after the
upsurge in crude oil prices, a research project was undertaken. The project aims to explore
the impact of rising crude oil prices on consumer behavior, especially their willingness to
adopt alternative energy sources, and the factors influencing their decisions. Additionally, the
project assesses how increasing crude oil prices may alter consumers' purchasing habits,
considering demographic and socioeconomic characteristics
. The study was conducted in various locations within the eastern Indian state of Odisha,
which hosts numerous industries heavily reliant on crude oil as an energy source and has a
population of approximately 45 million people. Using a stratified random sampling method,
the research selected a representative sample from the population, categorizing it into several
subgroups based on demographic factors such as age, gender, education level, and occupation
to ensure the obtained data accurately represents the population.
The research project employed a mixed-methods approach to collect both quantitative and
qualitative data. To ensure maximum participation and gather reliable data, interviews were
conducted through both online and in-person means. The survey questionnaire was designed
to collect information on consumer purchasing habits, behavior, and their inclination to
transition to alternative energy sources. The findings from this research project will provide
valuable insights into the repercussions of rising crude oil prices on spending patterns and
consumer behavior in Odisha. These insights will contribute to the development of
appropriate policies aimed at mitigating the adverse impacts of gasoline price hikes on the
economy and consumers' quality of life.
REVIEW OF LITERATURE
1. AKANSHA JAIN,. (2015, APRIL-JUNE). CRUDE OIL PRICES AND ITS IMPACT.
The article by review of the impact of crude oil prices on the Indian economy. The authors
explore the various channels through which changes in crude oil prices can affect the
economy, including through its impact on inflation, fiscal balances, and the current account.
They also review the empirical literature on the subject, which provides mixed evidence on
the magnitude and direction of the impact of crude oil prices on the Indian economy.
The authors highlight the importance of crude oil prices for the Indian economy, given the
country's heavy dependence on imports to meet its energy needs. They also note the
challenges faced by the government in managing the impact of crude oil price volatility,
including the need to balance the interests of various stakeholders, such as consumers,
businesses, and the government.
2. Rising prices of petrol and diesel in India since 2014: An Analytical Study
In the work authored by Dr. Dinesh Gabhane and Madhuri Gabhane in 2019, a
comprehensive analysis is presented regarding the escalating prices of petrol and diesel in
India starting from 2014. The authors delve into the diverse factors contributing to the
upsurge in fuel costs, encompassing elements such as global crude oil price fluctuations, tax
policies, and currency exchange rate variations.
Additionally, the article examines the repercussions of these surging fuel prices on the Indian
economy, with a particular focus on the challenges confronted by various sectors including
transportation, agriculture, and manufacturing. The authors underscore how the mounting
fuel costs have given rise to inflationary pressures, subsequently impacting the purchasing
power of consumers.
Furthermore, the authors assess the measures undertaken by the Indian government to
mitigate the effects of increasing fuel prices. These measures include reductions in taxes and
levies, the promotion of alternative energy sources, and enhancements in the efficiency of the
fuel supply chain.
3. VASANTH RAM KUMAR “CONSUMER PERCEPTIONS TOWARDS RISE IN FUEL PRICES -
WITH REFERENCE TO CHENNAI ”
The research conducted by Gowtham Ramkumar and Vasanth Ramkumar in 2021 delves into
the way consumers in Chennai perceive the increase in fuel prices. The authors executed a
survey among Chennai residents to gain insights into their perspectives and evaluations of the
rising fuel costs and how it influence their daily lives.
The study revealed that consumers in Chennai expressed significant apprehension regarding
the surge in fuel prices, with a considerable number of them indicating that it had a
substantial impact on their household budgets. Additionally, the authors noted that consumers
possessed limited comprehension of the factors steering fuel price fluctuations, often
ascribing the price hikes to government policies and perceived corruption.
In order to ameliorate the adverse effects of escalating fuel prices on consumer perceptions,
the authors advocate for enhancements in consumer awareness and education regarding the
elements that impact fuel prices. Furthermore, they emphasize the necessity for policymakers
to adopt a comprehensive approach in handling fuel prices, taking into consideration the
interests of consumers, businesses, and the government.
4. A CASE STUDY ON RISING PETROL AND DIESEL PRICES IN FOURTEEN CITIES OF
INDIA BY M. ANUSREE
The case study authored by M. Anusree and S.G. Sarika in 2019 investigates the issue of
increasing petrol and diesel prices across fourteen Indian cities. The authors delve into the
diverse elements that contribute to the escalation in fuel costs, encompassing global crude oil
prices, taxation and duties, as well as marketing expenditures. Furthermore, they conduct an
analysis of how the mounting fuel prices affect various sectors within the Indian economy,
including transportation, agriculture, and manufacturing.
This case study offers an intricate examination of the intricacies and obstacles associated with
fuel price management in India. It emphasizes the necessity of striking a balance among the
interests of different stakeholders, which include consumers, businesses, and the government.
The authors underscore the significance of establishing a comprehensive policy framework
for the regulation of fuel prices, one that accounts for the myriad factors influencing price
fluctuations and the potential repercussions on the broader economy.
5. Amadeo (2019) 'How crude oil prices affect gas prices', The Balance
Amadeo's 2019 article, featured in The Balance, delves into the correlation between crude oil
prices and gasoline prices. The author conducts an in-depth examination of how fluctuations
in crude oil prices affect gasoline prices, a matter of significant concern for both consumers
and policymakers.
The article sheds light on the various factors that contribute to alterations in gasoline prices,
encompassing elements such as crude oil prices, taxes, transportation expenses, and refining
costs. Additionally, the author elucidates the process by which crude oil prices are
determined and elucidates how shifts in global supply and demand can exert an influence on
pricing.
Furthermore, Amadeo explores the ramifications of gasoline prices on the broader economy,
encompassing their impact on consumer expenditure, inflation, and business operations. The
author observes that elevated gasoline prices can trigger inflation and curtail consumer
spending, potentially hampering economic growth.
6. Shukla (1994). Urbanization, energy use and greenhouse effects in economic
development
The article authored by Parikh and Shukla in 1994 offers a comprehensive examination of the
intricate interplay between urbanization, energy consumption, and greenhouse effects within
the context of economic development. The authors delve into the complexities involved in
effectively managing these elements in a sustainable manner.
In their review, the authors underscore the pivotal role of urbanization in propelling economic
growth. However, they also acknowledge the challenges stemming from the heightened
energy demands in urban settings. Parikh and Shukla explore a range of strategies aimed at
regulating energy consumption in urban areas, including enhancements in energy efficiency,
the promotion of renewable energy sources, and the encouragement of shifts in consumer
behavior.
Additionally, the authors delve into the significance of greenhouse effects in the context of
economic development, emphasizing the need to address the environmental consequences
associated with urbanization and energy utilization. They elaborate on various policy
approaches that can be employed to manage greenhouse effects, encompassing regulatory
measures, pricing mechanisms, and advancements in technology.
7. PARIKH (2002). DEMAND PROJECTIONS OF PETROLEUM PRODUCTS AND NATURAL GAS
IN INDIA
It provides a comprehensive analysis of the demand for petroleum products and natural gas in
India. The authors use a range of econometric models to project the demand for these energy
sources over the next two decades, taking into account various economic, demographic, and
technological factors.
The paper provides a detailed discussion of the key drivers of energy demand in India,
including population growth, economic development, urbanization, and changing consumer
preferences. The authors also discuss the role of government policies in shaping the future of
energy demand in India, such as subsidies for LPG and kerosene.
8. M.K. ANAND, “REFORMING FOSSIL FUEL PRICES IN INDIA”
This paper undertakes an analysis of various pricing approaches related to fuel and their
potential impact on subsidies. The authors investigate the fuel subsidies implemented by
different countries and how an increase in fuel prices could serve as a means to offset these
subsidies on one hand, while affecting household incomes on the other.
The authors contend that fuel subsidies wield a significant influence on the fiscal and welfare
dimensions of the economy. They assert that these subsidies place a substantial burden on
government finances and introduce distortions into fuel pricing. The paper proceeds to assess
diverse pricing strategies for reforming fuel subsidies, including approaches like price
deregulation, subsidy elimination, and targeted subsidies.
Furthermore, the authors delve into the repercussions of fuel subsidy reform on the well-
being of households, particularly those in lower-income brackets. They observe that such
reforms can have noteworthy distributional effects, as they may result in higher fuel prices
and reduced household incomes. The paper advocates for a comprehensive consideration of
the welfare implications associated with fuel subsidy reforms, emphasizing the importance of
designing policy interventions that can alleviate the adverse impacts on vulnerable
households.
In summary, this paper furnishes a valuable examination of the fiscal and welfare
consequences tied to fuel subsidy reforms in India. The authors spotlight the intricacies
inherent in the process of reforming fuel subsidies and stress the necessity of carefully
assessing the distributional effects of such reforms. The review underscores the significance
of formulating policy interventions that can mitigate the negative consequences of fuel
subsidy reforms on disadvantaged households while simultaneously achieving broader policy
goals related to fiscal sustainability and economic efficiency.
9. CHAKRABORTHY (2021) HIGH PUMP PRICES, INFECTIONS ERODE INDIA'S GASOLINE
RECOVERY
This explores the impact of high pump prices and COVID-19 infections on India's gasoline
recovery. The author provides a comprehensive analysis of the factors that are affecting the
demand for gasoline in India, which has been struggling to recover from the economic
slowdown caused by the pandemic.
The article highlights the impact of rising pump prices on the demand for gasoline, which has
led to a decrease in consumption in several Indian cities. The author also notes that the
COVID-19 pandemic has led to a decline in mobility, with many people choosing to stay at
home, which has further reduced the demand for gasoline.
10. APARNA (2013) IMPACT OF OIL PRICES ON THE INDIAN ECONOMY.
The impact of oil prices on the Indian economy is examined in the paper. The author analyses
the importance of oil as a crucial component in various industries, such as transportation,
manufacturing, and agriculture, and she emphasises the difficulties the Indian economy has as
a result of its reliance on imported oil.
According to the article's examination of the empirical research on the subject, fluctuations in
oil prices have a big effect on the Indian economy, mostly because of how they affect
inflation and the current account deficit. The author also talks on the difficulties the
government has in balancing the interests of numerous stakeholders while managing the
effects of changes in the price of oil.
The policy ramifications of the effect of oil prices on the Indian economy are discussed in the
article's conclusion. The author suggests that policymakers need to adopt a multi-faceted
approach to manage the impact of oil price changes, including measures to increase domestic
production of oil, encourage the use of alternative sources of energy, and manage the impact
of oil price changes on inflation and the balance of payments.
11. BHANUMURTHY, (2012). INDIA, OIL PRICE SHOCK AND ITS IMPACT ON INDIA.
This paper analyses the relationship between oil prices and key macroeconomic variables in
India, including inflation, GDP growth, and the current account balance. The authors find that
oil price shocks have a significant impact on the Indian economy, particularly through their
effect on inflation and the current account. They note that the impact of oil price shocks on
GDP growth is relatively muted, although this may reflect the fact that the Indian economy is
less energy-intensive than other economies.
The paper also examines the role of policy in mitigating the impact of oil price shocks,
highlighting the importance of measures such as subsidies and hedging strategies. The
authors note that the effectiveness of these measures may depend on the specific
characteristics of the Indian economy, such as its large rural population and diverse energy
mix.
12. SIVARAJAN, A. (2018). RISING FUEL PRICES IN BANGALORE - CAUSES AND IMPACT.
INTERNATIONAL JOURNAL OF RESEARCH AND ANALYTICAL REVIEWS (IJRAR), 2348-
1269, 2349-5138
The author places significant importance on the role of fuel pricing in Bangalore's economy,
given the city's heavy dependence on transportation for both individuals and the movement of
goods. The assessment acknowledges that surging fuel costs can lead to inflation, reduced
consumer spending, and a slowdown in economic growth. Moreover, the article draws
attention to the environmental ramifications of increasing fuel prices, as heightened fuel
consumption can contribute to higher levels of air pollution and the release of greenhouse
gases.
The author's analysis underscores the need to manage fuel prices in a way that balances the
interests of various stakeholders, including consumers, businesses, and the government.
Additionally, the review emphasizes the necessity for policies and initiatives that promote the
adoption of alternative energy sources, such as electric vehicles and renewable energy, in
order to reduce the economy's reliance on fossil fuels and mitigate the environmental
consequences of rising fuel prices.
13. Ghosh, T. (2016, May). Oil price, exchange rate and Indian macro economy
The article offers a comprehensive review of the existing literature, shedding light on the
intricate relationship between oil prices, exchange rates, and the Indian economy. The author
underscores that the influence of oil prices on the economy is far from straightforward,
hinging on several variables, including the nation's reliance on oil imports, the extent of oil
utilization in the production process, and the responses of policymakers to oil price
fluctuations.
Furthermore, the article underscores the pivotal role played by exchange rates in shaping how
oil price fluctuations impact the Indian economy. The author highlights that alterations in
exchange rates can impact the domestic currency's oil price, ultimately bearing significant
consequences for the economy.
14. SOUNDARAPANDIYAN, M. G. (2017). AN ANALYTICAL VIEW OF CRUDE OIL PRICES
The authors also discuss the policy responses of the Indian government to manage the impact
of crude oil price volatility, including measures to promote alternative sources of energy,
such as renewable energy and nuclear power. They also highlight the importance of domestic
oil exploration and production to reduce the country's dependence on imports.
The article provides a comprehensive overview of the literature on the subject, including both
theoretical and empirical studies. The authors review the evidence on the impact of crude oil
prices on various sectors of the Indian economy, including agriculture, manufacturing, and
transportation, highlighting the challenges faced by each sector.
OBJECTIVE
1. To study the trends in increasing prices of Crude Oil and rank the spending
patterns of consumers before and after the rise in fuel prices. ?
2. To determine the causes of the rising cost of fuel.
3. To assess people's willingness to switch to alternate sources.
4. How big of an impact does the environment have on consumers?
5. To offer suggestions on rising fuel prices?
RESEARCH QUESTION
1. How have consumers' spending patterns changed before and after the rise in crude oil prices,
and what are the trends in increasing crude oil prices?
2. What are the main factors contributing to the rise in fuel prices?
3. What is the level of willingness among consumers to switch to alternative sources of fuel, and
what are the factors that influence this decision?
4. what extent does the environment impact consumer behaviour and decision-making related to
fuel consumption?
RESEARCH GAP
For the research question on the main causes of rising fuel prices, there is a research gap in
the lack of understanding about the relative contributions of different factors, such as global
supply and demand, geopolitical tensions, taxes, and regulations, in driving the trend in fuel
prices over time. For the research question on the level of willingness among consumers to
switch to alternative sources of fuel, there is a research gap in understanding the role of
factors such as consumer attitudes, beliefs, and values, in influencing this decision, as well as
the effectiveness of policies and interventions aimed at promoting alternative fuels.
There is a research gap in understanding the price elasticity of demand for fuel and how it
varies across different consumer groups and fuel types. There is a research gap in
understanding the behavioral factors that influence consumer decision-making related to fuel
consumption, such as habits, social norms, and psychological factors.
CITATION METHOD
The literal meaning of citing is to acknowledge the author, article, journal, book
and another source from where references have been taken for the research
work. The citation format adopted in this research project work is the 20th
edition of Harvard Bluebook. The citation is uniform throughout
SCOPE
This research work focuses on the in some parts of Cuttack such as CDA Sector -13 and
CDA 7 . The survey questionnaire was responded to by people of different gender, age
groups, profession and income level. In this research work, we have tried to focus on the
Crude oil price change and on people’s spending habits, the driving force behind the shift
from Non—Renewable to Renewable energy sources special focus on E-Vehicle , concerns
regarding price increase, awareness regarding reason for price hike, environmental concern,
government initiatives to reduce dependency on crude oils and to decrease the price and other
related areas
HYPOTHESIS
▪ The people surveyed represent the general tendency of the people in the city of Cuttack.
▪ There is a direct relation between price of crude oil and the spending of the general public.
▪ People who have replied negatively as to regarding consumption pattern based on price of
crude oil does not have sufficient knowledge to answer the related questions asked to them.
▪ Price of Crude oil and Consumption based on it leads to increase in the GDP of the country
DATA SOURCE AND METHODOLOGY
The following research work has adopted econometric and analytical areas of research to
study various aspects of the topic. It also makes use of the exploratory method in order to
develop insights. Primary Data has been collected by conducting a survey using
questionnaires distributed amongst people of different gender, age, profession and income
level.
Secondary Data including journals, articles and selected government websites, Ministry of
Petroleum and existing literature in this field from earlier published studies have been used
to broaden the scope of the research to the areas which could not have been included in the
field survey Size of Sample The study has been conducted by using the sample of 53.
TOOLS
The study's instruments included the following:
1. Questionnaire: Random people at market place were the intended audience for the
questionnaire.
2. Survey: In order to obtain use of digital platform medium, the researcher personally
interviewed them physically as part of this study.
LIMITATIONS OF THE STUDY
1) Language barrier- Since both the researchers were non-familiar with the Odia language, it
was difficult to interview the parents, their children as well as the workers working in the
Anganwadi centres as they were not familiar with Hindi so it was difficult to communicate.
2) Interviewing the respondents was challenging because they were hesitant to answer some of
the questions. They might have given us the inaccurate information as a result of this.
3) Keeping into consideration the fever infection situation, many respondents were hesitant in
giving us the information with regards to how they dealt with it and many refused to be
interviewed.
4) Lack of literacy was also a factor that posed a challenge in conducting the survey amongst
the poorer sections of the society, since many a times these people are just not aware about
the schemes and facilities that the government provides them with which leads to the
stagnation of their lifestyle development as well as their inability to the questions and queries
posed to them by us.
