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Ecuador's president says country now producing oil at a loss

August 27 2015, 12:07

Image 0Ecuadoreans are already contending with a rumbling, ash-spewing volcano and rising living costs because they use the appreciating U.S. dollar as their currency, reports ctvnews.ca.

Now they've been told that Ecuador's oil -- its principal export and a vital source of government funding -- costs more to produce than it earns.

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.

The country also has fixed-price contracts -- the most significant with Petrochina from 2009 and Thailand this year that represent about $7 billion in sales.

Oil sales contribute 13 per cent to the national budget, or about $3.1 billion.

Tumbling oil prices this year have already prompted Correa to cut spending by $2.2 billion, Finance Minister Fausto Herrera said last week.

The government hasn't yet specified what programs will be cut. However, Correa did say that "for example some of the substantial improvements in education would be delayed."

Correa has come under criticism for not squirreling away any cash for emergencies but instead spending it on public works and other programs that have helped make the leftist economist popular.

The economic crunch and Correa's response have helped his opponents, who have been organizing street protests against him since June that have in recent weeks flared into violence.

Source/picture: ctvnews.ca

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