Markets: A Rigorous Course
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M11 · Problem 11 ★★ Check

Oil and the current account

Assume India's net crude imports are 4.8 mb/d and nominal GDP is US$4.0 trillion (both assumptions, to be replaced with current PPAC and MoSPI data). (a) Compute the first-order effect on the current account of a sustained $10/bbl rise in crude, as a share of GDP. (b) List three second-order effects that make the true effect smaller or larger. (c) Brent went from about $72 to a settled peak of $118 in March 2026. Using your assumptions, what is the annualised first-order CAD effect at the peak?

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Commas, ₹, % and 1e-3 notation are accepted.

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