In comments, reader Cad points out that Ecuador’s oil policy has a downside: the same fixed-price policy that lets the country take all of a price windfall exposes the government to large losses in the event of a price crash.
Under the best-known service contracts, the Ecuadorean government pays private companies a fixed price per barrel. It then resells the oil at the market price. In other words, it takes all the upside from price rises. (This new policy was the cause of several of the country’s big expropriation disputes.) A subset of service contracts allow private companies to help Ecuador’s state-owned companies (Petroamazonas and Petroecuador) extract oil, also at a per barrel fee.
Finding out Ecuadorean operating costs has proven remarkably hard, although there is some rough evidence that costs have recently risen rather dramatically. What we do know, however, is how much money crude oil extraction has generated for the Ecuadorean state. That revenue, in real terms, has fallen 55% since 2013. On a per barrel basis, revenue for the state has fallen 56%.
Of course, prices have also fallen. Ecuadorean exports fetched $95.63 per barrel in 2013, $84.14 in 2014, and $42.00 in 2015. (Those are weighted averages.) That is a ... 56% decline, which is the same as the per barrel decline in state revenue.
So not much evidence that resource nationalism has hurt revenues from those data.
What about international comparisons? Sadly, the data for Colombia only runs through 2014, but the Mexico data is available through 2015. In Mexico, oil revenues declined 55% in 2013-15. Revenues per barrel, however, declined by only 50%. So Mexico did slightly better than Ecuador at squeezing the upstream oil sector. (These figures do not count revenues from excise and value-added taxes on refined products.)
In short, Ecuador’s oil policy has not led the country to do worse than would be expected given the crash in oil prices ... but it is possible that an alternative policy would have kept government revenues from falling quite as far.
Now, Mexico’s oil tax policy is not particularly recommended. It is fiendishly complex, but it essentially boils down to a tax on Pemex’s gross revenues. The result is a company starved of resources and declining production. (Down 10% on 2013, whereas Ecuador is up 3%.) It is not clear that Mexico is an example to emulate.
But at least from these data it appears that Cad was incorrect when he wrote, “Mashi Correa’s greedy and short-sighted gamble was a disaster and now the people of Ecuador stand to suffer.” Rather, thus far his oil policy seems to be holding up remarkably well both in comparison to the price crash and to at least one benchmark comparison. Colombia may have done better; when we have the numbers, I will analyze them.
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