Economic News Analysis

Topics: Supply and demand, Attack, Attack! Pages: 2 (749 words) Published: January 14, 2013
Colombia's Ecopetrol cuts targets due to rebel attacks.
Article highlights:
In Colombia the guerilla group F:A:R:C attacks on Ecopetrol's pipeline increased more than triple this year. This has caused that the best-preforming oil company in Colombia, which in addition belongs to the state to reduce its production targets drastically. The guerrilla group have attacked this company various times because it generates a great income for the state, and many of these incomes funds the military which since the precedence of Juan Manuel Santos has increased its intensity on attacking the guerilla. According to reports the main well located in Putumayo have only been able to work with an efficiency of 50% compared to their average production capacity. This leads to a loss of approximately $1.8 million a day, in addition the repair of the environmental cost will mean that they will have to pay a cost of $310,000. Yet though anyway Ecopetrol is an extremely strong and important firm for Colombia’s national economy and the shares however are still holding strong and have returned a market value of more than $50 billion. Commentary:

The first thing that is most certain for this news is that there is going to be an inevitable negative effect on the quantity of oil supplied. This is because many of their pipeline machinery has suffered consequential damage therefor the company must allocate its resources, and capital in to repairing the damage while not in to in to its production. To represent this graphically I am going to use a production possibility curve where I will compare investment in production to investment in repair. Point “a” will be before the guerilla attack and point “b” will be after. The axis will be labeled from 1 to 5 but these will only symbolize magnitudes to take in comparison

As we can see in this visual representation in point a (before the attack) there is a there is a very large magnitude of production in comparison to point b (after the...
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