IOSR Journal of Business and Management (IOSR-JBM) e-ISSN: 2278-487X. Volume 7, Issue 6 (Jan. - Feb. 2013), PP 32-36 www.iosrjournals.org www.iosrjournals.org 32 | Page The impact of oil prices on stock exchange and CPI in Pakistan Ibraheem Ansar, Mis Nadia Asghar 1 1 (Management Sciences, Foundation University Institute of Engineering & Management Sciences, Pakistan) Abstract: The oil is one of the most important factors affecting the economy of the world that is why any change in the oil prices brings change in all the economic variables. For this purpose the researcher have analyzed the impact of oil prices on the Consumer Price Index (CPI) and Stock market (KSE-100 Index), For this purpose the researcher collected the data from secondary sources on CPI and KSE-100 Index from 2007 to 2012. To analyze the impact of the oil prices the researchers used the multi regression method and analyzed the data in eviws. For this purpose the researcher first checked the stationarity of the data through augmented dickey fuller test and then applied the Johansen cointegration Test and the cointegration results showed that there is a positive relationship among oil price, CPI and KSE-100 Index. Though the found results don’t show the very strong relationship but it helps in concluding that oil prices have effect on CPI and KSE-100 Index Keywords - Consumer price index, kse-100 Index, oil prices, cointegration I. Introduction Now day oil is the important for all of the countries to exist or move forward in the world so that each and every countries wants to produce own countries oil but most of the countries cannot get success. The year 2008 highest market volatility. Crisis after crisis seemed to hit the most of the countries that the result is the inflation rate increase so many times. Like in Pakistan the inflation in 2008 is 25.3% and oil is one of major factor which hit directly each and every commodity. Pakistan is the oil importer country so that we spend more day by day and the prices of oil are also being high. The demand of oil increase day by day not only in Pakistan it is increase all over the world. If we are talking about the oil companies which importer the oil from outside the countries is raised like down news July2012 oil demand increase 89,203 tones to 597,954 tones. The prices of oil increase double ratio as compare to demand of oil. The demand of oil is not only increase in Pakistan but this challenge is facings most of the other countries.1.3%world demand grow per year by 2030 and the developing countries demand increase 70%and 2.5%demand increase notably India and China. The main reason is that some countries has the ability to produce more but uncertain political situation The consumer price index is very important indicator for looking the economy position of the country the investors who invest in the stock exchange keep eye on the inflation rate because it effect the investor investment and their return and they want to evaluate the risk factor in the society and also the profit margin. The high inflation rate means the high interest rate make difficult conditions for investors the raised in inflation means the difficult condition to survive in the market Pakistan inflation rate in November 2012 was recorded 6.9% according to the government report Pakistan averaged Inflation Rate 10.55. But most of the people are not agree with the above figure.