Colombia's energy crisis is a complex and multifaceted issue that has the potential to significantly impact the country's economy and political landscape. The crisis is primarily driven by a combination of factors, including a decline in oil and natural gas production, regulatory reforms, tax hikes, and the global oil market disruptions caused by the conflict in the Middle East.
One of the most concerning aspects of the crisis is the rapid decline in oil production. According to regulatory data, Colombia's oil output has fallen by 23% in the last decade, with the country now pumping 23% less oil than it was a decade ago. This decline is well below the one million barrels per day that previous administrations considered fiscally viable, and it is having a significant impact on the country's economy and government finances.
The oil industry is Colombia's single largest export, generating 17% of export earnings in 2025, and a major contributor to fiscal income. The decline in oil production is therefore having a significant impact on the country's budget, which has never fully recovered from the economic fallout triggered by the COVID-19 pandemic. The government's budget deficit has blown out to 7.5% of GDP in 2025, the second highest on record, and economists predict it will reach an eyewatering 8.1% of GDP in 2026.
The crisis is also being exacerbated by a decline in natural gas production. While natural gas is viewed as a transitional source of energy for the renewable energy revolution, Colombia's natural gas industry has been hit hard by President Gustavo Petro's push to wean the country off its hydrocarbon dependency. The country's natural gas output has fallen by 35% in the last decade, and a fifth of natural gas consumed in Colombia is now imported, compared to less than 4% a year earlier.
The decline in natural gas production is having a significant impact on Colombia's economy, with the country's agricultural and manufacturing sectors, which are key energy sources for these industries, being particularly affected. The government is responding to the energy crisis by rapidly scaling up costly liquified petroleum gas (LPG) imports, which is creating major economic risk and impacting the country's fragile finances.
The crisis is also being exacerbated by the conflict in the Middle East, which has caused a sharp increase in energy prices and a loss of a substantial portion of Qatar's natural gas capacity. The conflict has also prevented a fifth of global hydrocarbon supply from navigating the Strait of Hormuz, causing oil prices to soar to over $144 per barrel and natural gas prices to surge to over $3.20 per million British Thermal Units (BTU).
The confluence of these events will cause natural gas prices to spiral ever higher at a crucial time for Colombia's economy. The government's budget deficit is already under significant pressure, and the potential for further oil shocks will only exacerbate the situation. The crisis is also being felt in the country's rural areas, where the number of combatants in illegal armed groups is at the highest level since the 2016 peace deal with the leftist Revolutionary Armed Forces of Colombia (FARC).
The leading industry association Naturgas believes natural gas prices will increase by 20 to 25% in some regions, notably the department of Antioquia, where the country's second largest city, Medellin, is located. Such price spikes, along with higher diesel prices, will impact Colombia's economically vital agricultural sector, which is responsible for 30% of exports and 6% of GDP. Natural gas is also a key energy source for the manufacturing sector, which produces 22% of exports and 11% of GDP.
The risks of diminished fiscal income and a softer economy are magnified by declining foreign investment in Colombia's oil patch and weaker production, especially with petroleum responsible for 17% of export income and 2.4% of GDP. This will place even greater pressure on Bogota's already fragile finances, which will worsen unless government spending is curtailed and additional sources of revenue are identified.
In conclusion, Colombia's energy crisis is a complex and multifaceted issue that has the potential to significantly impact the country's economy and political landscape. The government must take urgent action to address the crisis, including implementing regulatory reforms, reducing tax hikes, and diversifying its energy sources. The country's future depends on its ability to navigate this challenging period and emerge with a more resilient and sustainable energy sector.
