Ecuador Is Now Selling Oil at a Loss

BobH

Serial expat

Member since 07 June 2011

Quito

BobH

29 August 2015 22:23:57

841

BobH

29 August 2015 22:23:57

841

Quito

Presidente Correa said openly a few days ago what many have suspected -- that oil prices are now below Ecuador's production costs.

President Rafael Correa explained on Tuesday, during a visit to areas threatened by the Cotopaxi volcano, that it costs the OPEC nation $39 to produce a barrel of oil for which it only receives $30.

If crude prices remain below $40 that could mean more budget cuts or higher taxes.

Ecuador produces 538,000 barrels a day and under current circumstances stands to lose up to $3 million a day on them, though the state-owned Petroecuador oil company says it was profitable for the first half of 2015 because oil averaged $47 a barrel.

http://www.sanluisobispo.com/2015/08/26 … untry.html

If this keeps up long enough, it could have effects on political and social stability, which make Ecuador such a pleasant and relatively safe place to retire.

cccmedia

Ecuador / Colombia Expert

Member since 14 March 2014

Quito, Pichincha

cccmedia

29 August 2015 23:12:54

10197

cccmedia

29 August 2015 23:12:54

10197

Quito, Pichincha

Given the headline of this thread...

Does it make sense that the price of gasoline at the pump is artificially capped at $1.48 per liter for the popular grade of gas*?

Would it cripple the EC auto-related industries to let this gas price gradually rise to true market levels?

Would it further weaken the public's wobbly support for leadership if market pricing were allowed?

Would it tend to reduce air pollution in the cities if gasoline was not artificially cheap?

Just askin'.

cccmedia in Quito

*Correction... As reported correctly by Jesse Kimmerling later in this thread, the actual price of gasoline in Ecuador is $1.48 per gallon, not per liter.

enigma10

Member

Member since 21 April 2013

San Francisco

enigma10

31 August 2015 18:46:07

enigma10

31 August 2015 18:46:07

San Francisco

Thank you for that incite. The flux of economics represents a vital component in deciding on a retirement location.

mugtech

ViP

Member since 08 September 2012

mugtech

31 August 2015 21:33:50

4347

mugtech

31 August 2015 21:33:50

4347

cccmedia wrote:
Given the headline of this thread...

Does it make sense that the price of gasoline at the pump is artificially capped at $1.48 per liter for the popular grade of gas?

Would it cripple the EC auto-related industries to let this gas price gradually rise to true market levels?

Would it further weaken the public's wobbly support for leadership if market pricing were allowed?

Would it tend to reduce air pollution in the cities if gasoline was not artificially cheap?

Just askin'.

cccmedia in Quito

That is almost $6/gallon. Seems like raising that price would have another ripple effect through the economy, not as much as USA, where I filled up yesterday for $2.39/gal.

jessekimmerling

01 September 2015 05:00:23

jessekimmerling

01 September 2015 05:00:23

mugtech wrote:
cccmedia wrote:
Given the headline of this thread...

Does it make sense that the price of gasoline at the pump is artificially capped at $1.48 per liter for the popular grade of gas?

Would it cripple the EC auto-related industries to let this gas price gradually rise to true market levels?

Would it further weaken the public's wobbly support for leadership if market pricing were allowed?

Would it tend to reduce air pollution in the cities if gasoline was not artificially cheap?

Just askin'.

cccmedia in Quito

That is almost $6/gallon. Seems like raising that price would have another ripple effect through the economy, not as much as USA, where I filled up yesterday for $2.39/gal.

It's not $1.48 per liter. It's $1.48 per gallon. Gasoline is subsidized in Ecuador because the last time they tried to remove the subsidies and raise it to market value the Quichua brought the country to it's knees by blocking the major roads and shutting down commerce. Keep in mind, cheap gasoline in Ecuador is the reason we have cheap busses, cheap taxis, cheap food, cheap everything that relies on trucking.

cccmedia

Ecuador / Colombia Expert

Member since 14 March 2014

Quito, Pichincha

cccmedia

01 September 2015 05:28:17

10197

cccmedia

01 September 2015 05:28:17

10197

Quito, Pichincha

jessekimmerling wrote:
It's not $1.48 per liter. It's $1.48 per gallon.

Correct. Thank you for the correction, Jesse.

I have added this correction to the bottom of my first post in this thread. The Cheese Desk regrets the error.

cccmedia in Quito

cccmedia

Ecuador / Colombia Expert

Member since 14 March 2014

Quito, Pichincha

cccmedia

01 September 2015 06:04:35

10197

cccmedia

01 September 2015 06:04:35

10197

Quito, Pichincha

jessekimmerling wrote:
Gasoline is subsidized in Ecuador because the last time they tried to remove the subsidies and raise it to market value, the Quichua brought the country to its knees by blocking the major roads and shutting down commerce. Keep in mind, cheap gasoline in Ecuador is the reason we have cheap buses, cheap taxis, cheap food, cheap everything that relies on trucking.

Wow !

This is an absolutely amazing situation. In fact, as someone who grew up in the U.S. where the native tribes have seemed under control during our lifetimes, it is mind-blowing that the EC indigenous could prevent any attempt to help balance the budget through looser price controls on gasoline.

The recent "national strike" in which large numbers of indigenous put themselves in harm's way portends a scary potential scenario if gas prices were programmed to rise in such an inflammatory time.

With the price of crude so low and the indigenous in such a mood, Ecuador appears to be boxed in on this one.

cccmedia in Quito

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