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Lenin Moreno is in favor of hiring an oil insurance
Posted On 07 Dec 2018
Ecuadornews:
President Lenin Moreno agreed to contract oil insurance to guarantee the price of oil,since “living with the uncertainty of price fluctuations is not convenient”. The subject is being analyzed by finance ministers, Richard Martinez, and Hydrocarbons, Carlos Pérez. In the next few days there will be a resolution on this.
For oil analysts, the proposal is viable. Luis Calero explained that there are successful cases in Latin America: Mexico since 2001 contracts an oil insurance every year. He explained that the balance between the premiums he has had to pay and the amounts he has received for compensation for the price when it has fallen have been two to one. Uruguay got insurance for energy prices through the World Bank, which would also be an option for Ecuador.
Fernando Santos Alvite, former Minister of Energy, argued that the idea of insurance is that if the price falls to levels below $ 58.2 (the price set in the proforma) or at any price set by the Government, the insurer compensates the country. But consider that contracting insurance can be expensive. Prices could be around $ 4 per barrel, which means about $ 560 million a year. And he believes that a reduction in production may not happen, especially after the first failure of the negotiations of the Organization of Petroleum Exporting Countries. Yesterday, in Vienna, OPEC ended its meetings without an agreement.
After hours of negotiations, Saudi Energy Minister Jaled al Faleh expressed doubts about the possibility of a final agreement. But Iraqi Oil Minister Thamer alGhadbane hopes “we will reach an agreement tomorrow”,
According to experts, OPEC should reduce 1.5 million barrels of daily production in order to raise prices that have been falling. However, this issue is not well seen by the United States, which prefers low prices. (I)
