Ecuador's President Says Country Now Producing Oil At A Loss

Ecuador's President Rafael Correa during a broadcast to the Nation at Carondelet government palace in Quito

Ecuadoreans are already contending with a rumbling, ash-spewing volcano and rising living costs because they use the appreciating U.S. dollar as their currency. 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 US$39 to produce a barrel of oil for which it only receives US$30.

If crude prices remain below US$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 US$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 US$47 a barrel.

AP report continues:

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

Oil sales contribute 13 percent to the national budget, or about US$3.1 billion.

Tumbling oil prices this year have already prompted Correa to cut spending by US$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.