Impact of Oil Price Volatility on Fiscal Revenues and Public Expenditure in Ecuador (2018–2024)
DOI:
https://doi.org/10.46480/esj.9.2.261Keywords:
Impact of oil price volatility, Fiscal petroleum revenues, Public expenditure, Correlation and regression, Budget stabilizationAbstract
The pronounced volatility of oil prices has posed critical challenges to Ecuador’s fiscal stability over 2018–2024, injecting uncertainty into revenue collection and public expenditure planning. This study empirically examines how fluctuations in international (WTI) and local (Napo/Oriente) crude prices affect petroleum tax revenues and their budgetary allocation. We employ monthly time series to identify seasonal patterns and extreme shocks, and compute annual average prices to correlate with revenues reported by the Ministry of Finance. Using Pearson correlation coefficients and simple linear regressions, we find that the local price Napo_avg explains revenue variations more accurately (r = 0.905, R2 = 0.82) than WTI (r = 0.883, R2 = 0.78). Furthermore, petroleum revenues’ share of the General State Budget ranges from 0.21% to 0.54%, with a moderate correlation to Napo_avg (r ≈ 0.73). Sectoral analysis reveals positive associations with social welfare (r = 0.528) and health (r = 0.337), and counter-cyclical patterns in public investment (r = −0.291) and housing development (r = −0.700). These findings underscore the need for stabilization funds and fiscal rules to mitigate dependence on oil cycles.
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