Oil prices recover, but it might be too late for Colombia

Portafolio, the Colombian business journal, reported that, despite recent signs of the beginnings of a recovery in global oil prices, the problems with Colombia’s oil industry run deeper than just the price of oil. According to the International Energy Agency, the fall in global oil prices could hit Colombia harder than had originally been foreseen.

The IEA estimates that in 2015, Colombian oil production will average just 930,000 barrels per day – less than the 1 million barrels per day goal expectation of the Colombian government, and 60,000 bpd less than 2014’s level. Furthermore, Colombia’s experience is an outlier: of the 33 countries whose oil sectors are analyzed by the IEA, Colombia’s experienced the greatest drop in expected production. The explained that this is because of the ongoing attacks against Colombia’s oil infrastructure and sub-par exploration results from Colombia’s oil sector. As a case in point, state oil company Ecopetrol announced that its production had fallen 25 percent.

Nonetheless, the Colombian stock exchange had its best day of 2015, rebounding strongly on the back of the recovery in oil prices. It would seem that, so goes the price of oil, so goes the broader Colombian economy.

It would be foolish to hold out too much hope that the recent upswing in oil prices is a sign of bigger things to come. The Colombian government should be cautious and focus on shoring up the fundamentals of its domestic oil industry and on stimulating exploration. Unless Colombia can shore up its oil reserves, production will start dropping; hopefully the IEA’s prediction will not come to pass in 2015.