News and AnalysIs for

Government commentators and the local press blame the slide in oil prices for the significant devaluation of the Colombian peso seen in the past 18 months. The graph shows the kind of charts used to illustrate the point. We worked a little harder with some more rigorous statistical analysis and found that oil price movements are indeed important, explaining about 40% of exchange rate movements but this has only been the case since oil prices ‘fell off a cliff’ in the middle of last year.

Shortfalls in the supply of natural gas and drought due to El Niño weather could mean that thermal electrical generators will have to increase their use of diesel to generate energy, says a report.

A fund created in the tax reform last year which looks to guarantee stable fuel prices has been declared unconstitutional by Colombia’s Constitutional Court. The transportation industry says this will benefit consumers, while the government says it will study its options.

The battle over oil prices is a battle over production with Saudi Arabia saying it wants to regain US market share lost to higher-cost shale oil. But that is light oil and US refineries still need a significant supply of heavy crude due to the configuration of their plants. The graph shows that the US represents an increasing share of Ecopetrol (NYSE:EC) exports, at least over the last six quarters.

The Ministry of Mines and Energy (MinMinas) announced fuel prices for December, and diesel registered a bigger drop than gasoline, which the ministry says is at its lowest level in five years.

The Minister of Mines and Energy Tomas González and business representatives grouped under the National Business Owners Association (ANDI) in the Caribbean coast have agreed to review the formula and increase in natural gas rates that had been planned for November 30, 2015. It is not the first time that MinMinas has balked on price adjustments due to political outcry.

Both gasoline and diesel will drop in price in the month of November, driven by a fall in international prices and the exchange rate, although biodiesel prices continue to counteract this downward trend.

The El Niño weather phenomenon has led to a sharp increase in demand for natural gas, and industries on the Caribbean coast are calling for government intervention due to the deficit and soaring prices.

The Minister of Mines and Energy Tomás González met with regional leaders from the Nariño Department and the National Direction of Hydrocarbons and said that fuel prices in regions should remain stable through the end of November at least, and reassured there would be supply.

A national paper consulted with business leaders on where they thought the oil price would settle in the short term. And with words of caution and uncertainty, the response was that it would hover around US$50/barrel. Maybe.