Dr. R. Thenmozhi *, Trinley Paldon **
*Associate Professor, Dept of Management Studies, University of Madras, Chennai. Email:email@example.com ** Research Scholar, Dept of Management Studies, University of Madras, Chennai. Email: firstname.lastname@example.org Abstract
The pricing of crude oil in domestic monetary policy has always been efficacious in controlling or keeps in touch with the inflation. The immediate effects of inflation sparse on fuel and other convenient products in relation thereby disrupting monetary policy and often need for change to curb the effects. This present paper refers with world energy consumption for 2011 and India’s historical crude oil consumption. Volatility is measured by employing monthly standard deviation from 2007 to July 2012 and integrating crude oil, CPI to estimate the level of oil price. A study is proposed based on the secondary data. The outcomes of the analysis reveal that oil prices have a significant impact on both economic growth and inflation, when it is measured in local currencies. INTRODUCTION
Since the industrial revolution, the worlds’ appetite for energy from crude oil is at an escalating rate. The rise in prices of oil in the years is a worrying matter and contributed to the volatility of economics and proved its effects by disrupting the energy markets and jolting the responding factors hence a change in respondent is felt needed. Oil is a vital input in the production process of an economy from energy generation to manufacturing process and transporting the output to the market. Therefore volatility in oil prices disrupts the process of the economy from the dealers to the end users. Although industrialized developed countries seem to be more dependent on oil, evidence shows that the demand for oil in developing countries is on an increasing trend (Birol, 2007)- As oil is directly linked to the production process, it can have a significant impact on inflation, employment, and output for an oil price shock can increase inflation by increasing the cost of production (Loungani, 1986). It is always followed and considered effective that the pricing of crude oil in domestic monetary policy to controlling or keeps in touch with the inflation for crude being a primary commodity are always touted as inflation hedging. The prices of crude oil in the international market have increased steeply. Considering the impact of the price increase on common man and economically vulnerable sections of the society, Government has not increased the domestic prices of sensitive petroleum products in line with international prices. Holding the price-line has taken its toll on public sector oil marketing companies. Oil Marketing Companies (OMCs) namely, Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL) and IBP Ltd, as a result have suffered losses. Et al. reports of the working group on petroleum and gas. One of the respondent factors affecting the economy with increase in price of crude oil is inflation. Inflation is a continuing rise in the general price level usually attributed to an increase in the volume of money and credit relative to available goods and services. India imports about 80 % of its crude oil and the likely volatility price affects are at the optimum chance for unstable conductivity has always been negative impact on the domestic as well as international economy. The current inflation rate is at 6.75 in June which the monetary controller is on verge of reducing the interest rates to loosen the monetary tightening for growth is recorded to be slow. Past studies have provided contradicting findings with regard to the pricing of crude oil and its respondent factors that is inflation. Therefore there is a need to investigate between these two variables. REVIEW OF LITERATURE
In this contemporary time period energy has become so much part of our day to day...