On Tuesday we published our index graph of retail fuel prices through February and the average of WTI and Brent in pesos as a proxy for the price of a barrel of oil. We noted that retail prices were 20 to 30% above where they were in January 2010 even though crude prices were 15% below.
Over the last three years the biofuels industry has seen an expansion of its production capacity, now with 14 plants, four of which that have been built in this period.
Crude oil price benchmarks WTI and Brent are not identical so there is a gap. Some think the gap has some physical meaning. Others believe it is tautological: the consequence of different economic forces acting on each benchmark price.
We are not yet plumbing new depths – prices have been lower even in this century, even since the founding of the ANH – but likewise there is little beyond perhaps wishful thinking that this is going to stop soon.
The use of US Dollars as a reference for biofuels has meant a substantial increase in the cost of these fuels, raising doubts as to whether increasing the mixture of biofuels in diesels or gasoline is an economically sound decision.
The government announced a slight drop in fuel prices as it covers shortfalls in the fuel stabilization fund, which has politicians and the fuel industry retailers calling foul.
Benchmark crude oil prices peaked in the week of June 14 to 20 and have fallen virtually every week since then.
The Meta department is home to the lion’s share of oil production in Colombia, which local leaders say make it dependent on the industry and vulnerable to drops in the final price of a barrel. Some are calling for the government to contribute more to agricultural industries to compensate.
The attention always goes to crude oil production which gets the headlines. But there are worrisome trends in gas production as well.
With oil prices falling, investment for new projects from foreign investors is being pinched, which will leave its mark on Colombia and the country’s ability to compete for attention in a market where supply overwhelms demand.
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