Higher crude prices are lifting state revenue but falling output and fuel imports are limiting the benefit.

A surge driven from abroad

Ecuador is earning far more from oil than it expected this year, as the war in the Middle East pushes crude prices well above the government’s budget forecast. But the same global shock that has improved export revenue is also exposing the country’s long-running weakness: Ecuador is selling oil into a stronger market while producing less of it.

The Ministry of Finance built the 2026 budget around an expected Ecuadorian crude price of $53.50 per barrel. That figure now looks conservative. By March, the average price for Ecuadorian oil had reached $85.23 per barrel, according to Petroecuador, and projections for May put it at about $93.50.

The increase follows a sharp rise in international oil prices as uncertainty over the Middle East conflict disrupts energy markets and raises fears about global supply. West Texas Intermediate, the international benchmark most closely followed by Ecuador, was trading at $102 per barrel on the morning of May 5th. It had climbed even higher in April, reaching $112.95 per barrel on April 7th, its highest level since the war began.

That represents a major change from the beginning of the year. WTI averaged around $60 per barrel in January and $65 in February, before geopolitical tensions began pushing prices upward.

Ecuadorian crude normally sells at a discount to WTI because of quality penalties, but the international increase has been large enough to lift the local export price far beyond the assumptions used in the national budget.

Revenue more than doubles

The effect on public finances has been immediate. Between January and April 2026, Ecuador received $791 million in oil revenue, according to Ministry of Finance figures. That was $478 million more than during the same period in 2025, an increase of 153%.

By April, the government of President Daniel Noboa had already collected 26% of the oil export revenue it expected for the entire year. The budget had projected $3.027 billion in total oil export revenue for 2026.

The increase matters because oil remains one of the state’s most important sources of income. Revenue from crude exports helps finance public works and projects included in the Annual Investment Plan. When oil income rises, the government also has more room to manage spending without relying as heavily on borrowing.

Daniel Lemus, director of the Center for Public Policy Development at ESPOL, said the additional revenue reduces pressure on the state’s financing needs. In practical terms, higher oil income gives the government more flexibility at a time when Ecuador continues to face security, infrastructure and fiscal demands.

But that flexibility is not the same as a permanent solution. Oil windfalls depend on international prices, and those can shift quickly. The government is benefiting from a global crisis it does not control, while still dealing with domestic production and refining problems it has struggled to resolve.

Fuel subsidies still matter

The revenue gain is also being shaped by the government’s fuel pricing policy. Lemus said the benefit from higher oil income would have been largely absorbed if Ecuador had not reduced part of the fuel subsidy.

The government now uses a price band system for diesel and low-octane gasoline. Under that system, fuel prices can change each month, but the increase is capped at 5%, while reductions can be as much as 10%. That means local prices do not rise fully in line with international oil prices.

When the international price is higher than the domestic sale price, the state covers the difference as a subsidy. As a result, consumers are still shielded from the full cost of global fuel prices, but not completely. Lemus noted that households are feeling the increase in their wallets, even though part of the subsidy remains in place.

The system gives the government a middle path. It avoids the full fiscal burden of maintaining a fixed, heavily subsidized price, but it also avoids the political and social shock of passing the entire international increase directly to consumers.

That balance is especially important in Ecuador, where fuel subsidy reforms have repeatedly triggered public resistance. The current model reduces the state’s exposure, but it does not eliminate it.

Production continues to weaken

The larger problem is that Ecuador is not producing enough oil to take full advantage of the high-price environment.

Between January and February 2026, the country extracted an average of 463,000 barrels per day. That was down 2% from the 472,000 barrels per day produced during the same period in 2025.

The decline may look modest, but it comes at a costly moment. Every barrel not produced now represents a lost opportunity to benefit from unusually strong prices. If production had remained stable, the state’s oil revenue would likely be even higher.

Several factors are weighing on output. One is the gradual shutdown of wells in the ITT block, following the 2023 popular consultation in which voters approved ending oil extraction in that area. That decision set Ecuador on a path toward reducing production from one of its most important oil zones.

At the same time, Petroecuador has reduced investment in exploration in recent years. The state-owned company is responsible for about 80% of the country’s oil production, making its investment decisions central to national output. Lower exploration spending limits the ability to replace declining fields or bring new reserves into production.

That leaves Ecuador in a difficult position: prices are rising, but the country’s capacity to produce more crude is not keeping pace.

Imports and refinery problems reduce the gain

Higher global oil prices do not only help Ecuador. They also raise the cost of the fuels the country must import.

Petroecuador is spending more to bring in fuel products, and that pressure has increased because of problems at the Esmeraldas Refinery. The refinery has been operating at about 40% of capacity since a fire on March 1st, forcing the state oil company to rely more heavily on imports to meet domestic demand.

That creates a second drag on the public finances. On one side, Ecuador earns more from crude exports. On the other, Petroecuador pays more for imported fuels, while still operating within a subsidy system that requires the state to absorb part of the price difference.

The refinery’s reduced capacity also limits the country’s ability to turn its own crude into the fuels Ecuadorian consumers and businesses need. Until operations recover, the oil company will have to spend more abroad to cover the domestic market.

If those conditions continue, Petroecuador may end the year with fewer surpluses to transfer to the national budget. That would weaken part of the fiscal benefit created by higher crude prices.

For now, the oil price surge has given Ecuador’s government a welcome cushion. But it is a cushion built on circumstances outside the country’s control. Without stronger production, greater investment and a more reliable refining system, Ecuador’s oil windfall may ease the pressure on public accounts without solving the structural problems that keep the country from turning high prices into lasting fiscal strength.