To close 2022, the government of Gustavo Petro presented the Financial Plan for 2023, where the macroeconomic assumptions raised by the Ministry of Finance were found and there for the year to date there is a price of US$94.2 for a barrel of Brent. However, since November, the reference crude for Colombia has been below this line, since the price has oscillated between US$77 and US$85 for each unit.
Additionally, the International Energy Agency (IEA) has a more optimistic expectation regarding prices for this year, since they estimate an average of US$83 per barrel, which means that there is a difference of at least US$11 per barrel.
David Cubides, director of economic research at Alianza Valores, pointed out that there are several impacts related to this difference. The first has to do with the income that the Government estimates, compared to what it could actually receive. In addition, according to the expert, the fiscal income related to each dollar in the price of crude is between $300,000 million and $500,000 million.
In other words, for this year the income with which the Government accounts could be between $3 and $5 trillion less, due to the difference in expectations. He explained that Alianza Valores estimates that during the beginning of the year the price could even fall, due to the slowdown in the economy. “But it is a scenario that we expect to pick up towards the end of the year due to the recovery of the economy and the scarcity of raw materials,” he clarified.
But beware, there is another factor that is also impacted by the decrease in the price of Brent. To the extent that it falls, so will the price differential for liquid fuels, such as gasoline and diesel. In this way, there will be a lower deficit or government debt with the Fuel Price Stabilization Fund (Fepc).
Therefore, it is important to specify that by 2022 the deficit for this account is expected to cost the Government close to $38 billion, that is, more than what it expects to collect with the tax reform promoted by the Petro government and which is already in force. Added to this is the fact that four adjustments have been made to gasoline prices that already add up to $1,000. However, the same has not yet been done with diesel, which would not have risen at least in the first half.
José Ignacio López, director of economic research at Corficolombiana, said that this means solving only part of the problem, to the extent that close to 50% of the debt is generated by the subsidy for this fuel. Despite a lower differential between the local and international prices due to the lower cost of Brent, analysts consider that it is necessary to start the path of increases.
The evolution of the price of a barrel of Brent will depend in part on the economic slowdown, as well as the evolution of the conflict between Ukraine and Russia, which has led to increases in the price of ‘commodities’. The International Energy Agency estimates that for the first quarter of the year, the price will be slightly affected upwards, due to the blockade imposed by the European Union on maritime imports of petroleum products from Russia.
However, for the second half of the year, the IEA considers that there will be a slight decline in oil prices, with which the annual average of reference crude oil for Colombia would close at US$83 per barrel. Likewise, by 2024 it would continue to fall, normalizing its price, reaching an average of US$78.