Ecuador is an oil producer that’s beginning to really feel like an oil consumer. The nation now spends virtually as many {dollars} importing gasoline, diesel and cooking gasoline because it earns from promoting crude.
For a dollarized financial system that can’t print its personal foreign money, shedding that additional oil revenue is like shedding a security web simply when safety and social pressures are rising.
For years, the “oil cushion” paid the distinction between low cost gasoline at house and the true value overseas, and nonetheless left cash for the price range. In 2022, excessive costs gave Ecuador a file surplus of about $5.7 billion between oil export revenue and gasoline import prices.
By 2025, that cushion is projected to shrink to roughly $662 million. In 2026 it’d get better solely to round $945 million – a skinny margin.
The math behind that is easy and worrying. The authorities expects to earn about $5.9 billion from crude exports in 2026, however might spend near $5.0 billion shopping for refined fuels.
Ecuador sells heavy crude at roughly $53 a barrel and buys again gasoline and diesel close to $74 a barrel. The previous mannequin – extract, export, subsidise and nonetheless have money left – is breaking.
Ecuador’s Oil Decline Is a Crisis Made by Politics
There is a narrative of decisions and neglect behind the numbers. Oil manufacturing stagnated close to 470,000 barrels a day after which started to fall. A referendum ordered the shutdown of the Yasuní-ITT block, taking out a subject that after provided greater than a tenth of nationwide output.
Key pipelines weren’t protected in time from river erosion and landslides; after they failed, a whole bunch of wells had been shut. Investment at state firm Petroecuador collapsed, refineries broke down, and the nation needed to import extra gasoline on the worst potential second.
Non-oil exports like shrimp, cocoa and mining at the moment are bringing in additional {dollars} than crude. That reveals the power of the non-public sector.
But as gasoline subsidies are minimize and protests organised by entrenched teams develop louder, Ecuador affords a transparent lesson: when politics punishes funding and rewards straightforward guarantees, the invoice all the time arrives – and it’s paid by unusual taxpayers and savers.
