Ecuador's fuel import costs have surpassed crude and fuel oil export income for the first time in more than 50 years, energy minister Fernando Santos has revealed. Exports by the South American country of crude and fuel oil--the only refined product Ecuador exports--were $2.9bn, $100m lower than imports of high-octane naphtha for blending into gasoline, LPG, and diesel which cost $3bn during the first half of the year, thanks to oil prices falling 30% from the same period a year ago.
This marks the first time Ecuador's energy imports have exceeded exports since Ecuador started exporting oil in 1972, and highlights the vulnerability of oil-reliant economies whenever oil prices fall sharply. The World Bank has named Iraq, Libya, Venezuela, Equatorial Guinea, Nigeria, Iran, Guyana, Algeria, Azerbaijan, and Kazakhstan as the most vulnerable oil-producing nations due to their high exposure to the oil and gas sector and relative lack of diversification. Latin American economies are, however, not much better off due to their high reliance on oil coupled with a lack of a clear roadmap in the global energy transition. Venezuela, Ecuador, and Colombia are particularly dependent on oil exports and revenues, while Bolivia and Trinidad depend heavily on natural gas. Meanwhile, the small nation of Guyana is poised to become the largest per-capita oil producer in the world, thanks to the swathe of oil discoveries made by ExxonMobil and its partners. Argentina, Brazil, and Mexico are not as fossil fuel dependent, but oil and gas still rank among the largest industries in each country in terms of fiscal revenues, exports, and investments.
A report by the Inter-American Development Bank (IDB) shows that in scenarios consistent with the 1.5-degree goal, Latin American oil production needs to fall to less than 4 million barrels per day by 2035--60% below pre-pandemic levels. This would mean that up to 81% of their proven, probable, and possible oil reserves will not be used before 2035. The fiscal impact would be enormous: the region's oil exporters could lose up to around US$ 3 trillion in royalties by 2035 if strong global climate action materializes.
By Alex Kimani for Oilprice.com
Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. More
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