Colombia is grappling with a deepening fiscal crisis as oil and natural gas production plummets, exacerbated by regulatory reforms and tax increases under President Gustavo Petro. February 2026 data reveals oil output has fallen to its lowest level since July 2021, averaging 734,924 barrels per day, a stark 23% decline from a decade ago. This drop is severely impacting government revenues, which rely heavily on oil exports that accounted for 17% of earnings in 2025.

The situation is further complicated by rising global energy prices, driven by geopolitical tensions in the Middle East, particularly following Iran’s closure of the Strait of Hormuz. Colombia’s reliance on imported liquefied petroleum gas (LPG) has surged, with imports now constituting 20% of natural gas consumption, up from less than 4% a year earlier. These developments threaten to inflate natural gas prices by 20-25%, impacting key sectors such as agriculture and manufacturing, which are vital to the economy.

Market professionals should monitor Colombia’s fiscal trajectory closely, as the anticipated budget deficit could reach 8.1% of GDP in 2026, potentially leading to increased borrowing costs and further economic instability.

Source: oilprice.com