Attached.

1
Running head: OIL REVENUES IN COLOMBIA AND ITS IMPACTS.

Student’s Name
Oil Revenues in Colombia and its impacts.
Professor’s Name
CRN Number
Date

2
OIL REVENUES IN COLOMBIA AND ITS IMPACTS.
Table of contents
1.

Abstract.

2.

Introduction and background information.

3.

Impacts of low income.

4.

Conclusions and recommendations.

5.

References.

3
OIL REVENUES IN COLOMBIA AND ITS IMPACTS.
1.

Abstract

Over the last one or two, the global fall in commodity prices has profoundly slowed the
economic growth rate of the Colombian government. Colombia greatly depends on oil as its
primary export and hence the collapse in the price of oil products has led to the reduction in budget
revenues and growth estimates for the state. According to the recent released statistical analysis,
Colombia has identified itself as the fourth largest oil producer with 988,000 barrel per day (bpd)
and the third largest exporter donating 650,000 bpd (Castiblanco, Etter, & Ramirez, 2015). This
figure makes the oil export to become the leading sector amounting to 55% of the total exports of
the country and 22% of the total government revenue.
2.

Introduction and background information

History has it that the Colombians oil production began in the early 1920s which were their
golden era. By then, the demand for oil products was extremely high with stable prices and hence
government had enough source of revenue to sustain its development projects. However, over the
period of the last few years’ oil prices have drastically dropped with over 60% which has clearly
affected the Colombian economy. Between 2014 and 2015, oil export in Colombia decreased by
over 45% lowering the total earned revenue from $28 billion to approximately $20 billion by the
end of the year 2015. Overall, due to Colombia’s consistently reduction of its core first export
resulting to low revenue income to the government, the effect has consequently lead to an increase
in external debt (Dreger & Rahmani, 2016). The increase in foreign debt has had an enormous
impact on the nation acting as the primary barrier towards major development project since the
government has no reliable source of capital to support them. This research will have a deep
analysis of the economic crisis of Colombian system of government indicating on how the low-

4
OIL REVENUES IN COLOMBIA AND ITS IMPACTS.
income revenue from oil export has affected the whole nation at large. Some of the main impacts
of low oil revenue income include increased external debt, high inflation rate, poor health care,
high poverty rates, and poor educational performance among others. However, there are some
development projects such as improved infrastructural networks within the areas where oil
products were being extracted.
3.

Impacts of low oil revenue.

The majority of Columbia’s oil is extracted from conventional onshore basins producing
the highest percentage of export. The biggest advantage of this extraction is that whether the
income from its production is low, infrastructure must be maintained to the highest standard to
ensure smooth exportation of oil products for final processing before exportation to different
destinies. Construction and maintenance of either roads or railways have always been on the
forefront on Colombian budget so as to ensure that transport sector is never affected (Zedalis,
2007). While making this balance, Colombian citizens have benefited from this project since their
movements from one place to another does not have significant barriers.
Through the small amount allocated to different sectors, the government has always been
making a step forward and created job opportunities to its citizens. Major industries and companies
have been in the first position of trying to help the government earn some extra income other than
concentrating on oil exports only. In oil extraction sector, more companies have created jobs to
Colombian residence, and this has helped in poverty eradication among them. Roads leading to oil
basins always get processed, and citizens take advantage to hold available chances of jobs as a
way of earning their living.

5
OIL REVENUES IN COLOMBIA AND ITS IMPACTS.
However, small oil revenue income in Columbia has had many demerits as compared to
merits. Overdependence on oil as a primary revenue generation sector has had a greater
relationship with poverty. A...