Decomposition analysis for the Ecuadorian transportation sector

First author 1 a; Second author a

a
Universidad Nacional de Colombia Sede Manizales

Grupo de Investigacin en Potencia, Energa y Mercados (GIPEM)

Kilmetro 7 va al aeropuerto, Campus La Nubia, Edificio Q, 2 piso saln 201

Abstract

This article is based on the study of energy consumption of each of the socio-economic sectors
of the country (transport, industry, residential, among others) disaggregated by each of the
energy sources. Ecuadorian transportation sector is one of the activities of higher energy
consumption and its increase is gradual, since 2010, this sector was the ruling power in the
Ecuador consumer, using 50% of the national demand.

Transport has very close ties with the economic development of the country in this way the
expansion in the sector transport goes very hand in hand with economic growth. The objective
of this study is to investigate the fuel consumption that requires the Ecuador in each strategic
sector, obtained from different sources the information necessary to have knowledge about the
economic losses caused by the fuel subsidy to the country; This, the main cause which seriously
affects the national economy especially to the balance of trade and payments to foreign trade,
surpassing the 200% of the State general budget grant.

He sector transport has attained convert is in the engine fundamental of movement of the
economy of the country and in a sector main from the point of view socio-economic, since not
only allows enhance the access to resources, goods and inputs, which also is an activity essential
for the development of them relations human; the advancement of this sector is considered
priority for the change of the productive matrix.

Keywords: Ecuadorian transportation sector; decomposition analysis; Ecuadorian energy

sector.
1. Introduction

The current energy situation presenting the Ecuador is the result of the combination of various
economic, political, technological, social and environmental trends among others that come
together in a complex picture of crisis and adjustment, in more recent years by an increase in
prices, especially in hydrocarbons and especially in oil.

The elevation of prices of oil, in recent years, has significantly strengthened the questioning of
the energy model based on fossil fuels (oil, coal and natural gas). Oil is the most traded fuel,
and, as a result, the behavior of their prices impacts significantly on trade and our country's
finances.

The development of the transport sector is considered priority by the national Government as a
necessary condition for the change of the productive matrix. Transport services affect
transversely to m In the present work is give to know the consumption of fuels in the different
types of sectors socio-economic of the Ecuador as transport, industry, residential and others;
which has led to the country to suffer a great crisis, because the State subsidizes them different
types of fuel which exceeds the 200% of the budget general of the State. Discuss consumption
in the transport sector is the largest consumer of fuels, which we'll discuss each mode of
transport which is the fuel which dissipates or consumed in greater quantity, generating different
tables and graphics will be released the actual values that occur in our country in this sector.any
sectors of the economy and are a basic component for systemic competitiveness.

1.1. Objective

Investigate the consumption of fuel that requires the Ecuador in each sector strategic, obtaining
of different sources the information required to have the knowledge about them losses economic
that cause the subsidy of fuels to the country, in order assess its effectiveness and detect their
strengths and weaknesses.

2. Overview of the Ecuadorian transportation sector

El transporte se ha convertido en el motor de movimiento de la economa y en un sector

fundamental desde el punto de vista social y econmico, ya que no solo permite potenciar el
acceso a recursos, bienes e insumos, tambin es una actividad esencial para el desarrollo de las
relaciones humanas. [1]

Among other functions transport connects consumers and producers, power productive
specialization, moves goods and people and divided Nations and territories so that their
planning and good performance is important to improve the economic dynamics of the country
and achieve the growth and development of the regions. [1]

Therefore, that the present analysis of the transport sector aims to review the importance of the
sector of the economy as a whole. To this end, the situation of the sector will be evaluated
taking into account several aspects, within which stand the analysis of the GDP of the sector,
external accounts, employment and composition in the domestic market. [1]

In Ecuador, it is observed that from the year 2009, the contribution of the transport sector
represents an important category in national GDP since it has remained with a constant of about
6.5% stake and 6.6%, which has made that it be considered as the fifth sector that contributed
most to the GDP in 2013. [1]

GDP in the transportation SECTOR (million dollar)

The growth of the sector is mainly determined by the infrastructure projects driven by the State
since, from the construction of new hydroelectric and thermal power stations to the
compensation for mining works, has sued the recruitment of carriers. [1]

The high weight of the transport in the total national energy consumption sector is linked to the
increase of mobility, as well as the levels of motorization. These factors largely explain the
evolution of this sector energy intensity, expressed as the energy consumption of the transport
sector to the gross domestic product, being a basic indicator of eco-efficiency and decoupling.
In the period 1990-2009, the value of the transportation energy intensity has maintained an
upward trend in the first seven years, with growth energy, generally rates higher than GDP.
Since 2004, we noted that the energy intensity of transport has begun a downward trend. [2]
Transport by road, predominantly in terms of energy consumption, represents 79.5% of energy
consumption. Secondly, maritime transport (14%) is located. Modes of transport with a lower
percentage of representation are the air (4%) and railway (2.8%), according to 2008 data. [2]

2.1. Transport and energy consumption

Energy consumption in the transport sector data shows two aspects which, together, are
worrying: a considerable growth coupled with a high relative share in final consumption. The
consumption of final energy by the sector of transportation in Ecuador amounted in 2010 to 42
million tonnes of oil equivalent. [2]

42 Million BOE

Air
Sea
Others; 2% Air; 6% Heavy load
Light load; 18% Sea; 8% Buses
Taxis
Cars and Jeeps
Cars and Jeeps; 17%
Light load
Taxis; 4% Heavy load; 42% Others
Buses; 3%

2.2. Dieselizacion

The increase in diesel vehicles is primarily responsible for the growth of energy consumption.
Diesel vehicles capture virtually all of the increase of cars in Ecuador in this period, and in the
year 2008 already accounted for 45.1% of the total. In the case of gasoline, the results show that
its energy consumption is reduced as a consequence of the decrease of the distance travelled and
the improvement of its efficiency. The fleet of vehicles for private use increased 70% in this
period. Almost all of that growth has been captured by the diesel vehicles segment, while that of
gasoline has remained stable. The reasons that may explain this strong increase in the vehicle
fleet are the increase of population, economic growth, low interest rates, the trend towards a
model of dispersed urbanization and transport policy. [1]

2.3. Influence of the prices of fuels in transport demand.

Negative externalities related to energy consumption suggest the desirability of implementing
public policies to mitigate them. [2]

There is a wide array of instruments to encourage reductions in energy consumption in the

transportation sector, which can be grouped into four categories: instruments of Regulation
(including speed limits, requirements for maintenance of the vehicle, occupation requirements
and standards of energy consumption by vehicles), economic (basically, taxes, tolls and
subsidies), informational (efficient driving, information and education campaigns) and other
instruments (urban and transport planning voluntary agreements, public provision and
investment, among others). Within the instruments to reduce the energy consumption in the
transport sector, economists tend to defend the use of economic instruments and, in particular,
those that provide a signal of prices, such as for example taxes on fuels. However, non-
economic instruments (of regulation, information and "other" measures) can play a very
relevant role to attack the factor scale and/or induce modal changes. One of the fundamental
problems in the application of tax to control energy consumption in the transport sector are the
low price of fuel demand elasticities and high elasticity income of that demand. [2]

2.4. Main definitions

Use: refers to the type of use that is given to the vehicle, such as for rent, private, State and
others. [3]

Passenger and cargo vehicle: means of transportation to motor, designed to carry people or
things. [3]

Vehicle class: name that is given to a type of vehicle. [3]

Brand: signal that allows to identify or distinguish something or to give any information
about it. [3]

Passengers: persons or individuals who are traveling from one point or location to another.
[3]

Tonnage: load capacity which has a boat or other vehicle of transport, measured in tons. [3]

Air transport: is the service of moving from one place to other passengers or loading,
using aircraft. [3]
 International shipping: comprises the international maritime flow of passengers, ships and
cargo. [3]

2.5. Transport statistics yearbook

To have a more clear and concise on the sector information transport has resorted to investigate
the Statistical Yearbook, which contains the following information: vehicles registered land, air,
and sea. The results are presented to level national and provincial.

2.5.1. Ground transportation

It will then be released the number of vehicles registered in the different provinces of Ecuador,
as well as its use and class according to the latest release of the INEC, which corresponds to the
year 2014.

Vehicles registered year 2014

National total: 1.752.712

 Vehicles registered, according to use year 2014

National total: 1.752.712

* Note: In the category others, is clustered municipalities and sectional governments.

Vehicles registered, according to class year 2014

National total: 1.752.712

2.5.2. Air transport

It will then be released international air traffic as their inputs and international departures of
passengers and cargo, according to the latest release of the INEC, which corresponds to the year
2014.

International air traffic

Input and output international passenger

The following chart indicates the percentage of passengers who move from one place to another
and what is the province which has the highest rate of entry and exit of passengers.

In the country entered 1.996.851 passengers during the year 2014, by the airports of Quito,
Guayaquil and Esmeraldas of which, the (41%) it made by Guayaquil, the 58% by Quito and the
1% by emeralds.
 International air traffic

Input and output international cargo

2.5.3. Maritime transport

It will then be released the number of ships, inputs and outputs, according to port entities at the
national level, according to the latest release of the INEC, which corresponds to the year 2014.

Number of inputs and outputs, according to port entities ships

National total: 2.749

Year 2014

The following graph presents the information of cargo both import and export register tonnage
NET (TNR), record gross (GRT) cargo tons tonnage; in each one of the following port:

1. Port authority of Guayaquil (APG)

2. Port authority of Esmeraldas (APE)

3. Port authority of Esmeraldas (APM)

4. Port authority of Puerto Bolvar (APPB)

5. Oil Superintendence of Balao (SUINBA)

6. Oil Superintendent the freedom (SUINLI)

7. Superintendency oil Salitral (SUINSA).

2.6. The policy of subsidies for fuels is unsustainable

Rather than expand the frontier of exploration and exploitation of oil, which includes the
exploitation of the ITT crude, running the risk of seriously affecting the natural reserve of
YASUNI, it is urgent to streamline the policy of subsidies for fuel, because as is applied in the
country, this is unsustainable. [4]

In the 2007-2013 period, the Government of the citizen revolution imported approximately $
29,000 million in liquefied petroleum (LPG), diesel, gasoline, JET FUEL and AVGAS CUTTER
STOCKS. This amount exceeds 200% the General State budget for the year 2007, which in that
year was USD 9.767 million. [4]

The amount of import of lubricants, fertilizers and synthetic fibers is not included in this
amount. [4]

Also the amount of fuel in the indicated period imports exceed a 62.76% the amount of income
that supposedly would lead to the exploitation of crude oil of the ITT, which is estimated at
USD 18.200 million. [4]

Why try to extract crude from the ITT (with the risk of affecting the YASUNI reserve), if the
side of the fuel generates huge losses for the Ecuadorian State? as shown in the following detail.
[4]

1. In the case of "liquefied petroleum gas" - LPG, or "gas for domestic use", to meet the national
demand, the Government imports more than 82% of this fuel, bought it from international price
and sold it to the public in the national market at subsidized price, i.e. on a USD 1.60 15 kg gas
cylinder. [4]

In the 2007-2013 period, the cost of import of a 15 kg gas cylinder was the following: in 2007
was $ 11.43, in 2008 was $ 12.53, in 2009 was 7.92 USD, in 2010 was $ 9.63, in 2011 was USD
13.80, in 2012 it was USD 12.48 and in 2013 from $ 12.01. [4]

To this cost of imported gas must add operating and marketing costs charged international com

a) cost of storage to the bulk rate or spheres of gas.

b) cost of storage fee at retail or gas cylinders.

c) costs of transporting gas, either by pipeline or in auto-tanques.

d) costs of distribution of gas in the city.

e) costs of gas marketing.

f) costs of maintenance of the cylinders.

g) cost of replacement of cylinders.panies that provide these services as follows: [4]

In the 2007-2013 period, the Government of the citizen revolution imported 5.645.596 metric
tons of LPG at a cost of $ 4.301 billion, and to sell this product in the domestic market at
subsidized price, i.e. on a USD 1.60 15 kg gas cylinder, the State lost $ 3.736 million in the
marketing of this product. [4]

This amount which is a loss for the State is transformed into income and profit for international
companies that sold this type of fuel to the Ecuadorian State. [4]

2. in the case of diesel, to meet the national demand, Government matters more than 60% of this
product; It also bought it to international price and sold it to the public in the national market at
subsidized price, i.e. on a $ 1.02 a gallon. [4]

In the 2007-2013 period, the cost of a gallon of diesel imports was the following: in 2007 was
USD 2.17, in 2008 was $ 2.99, in 2009 was $ 1.80, in 2010 was $ 2.29, in 2011 was $ 3.10, in
2012 it was USD 3.22 and in 2013 was USD 3.12 the gallon of diesel. [4]

To this cost of gallon of imported diesel, you have to add the costs of marketing and distribution
in the domestic market, whose activity is done business marketers foreign and national
distributors. [4]

In the 2007-2013 period, the regime of the citizen revolution imported approximately 80 million
barrels of fuel at a cost of $ 8.473 million, and to sell this product in the domestic market at
subsidized price, i.e. on $ 1.02 a gallon, the State lost $ 5.054 billion in the marketing of this
product. [4]

3. in the case of gasoline, to meet the national demand, Government matters more than 60% of
this product; It also purchased it from international price and sold to the public in the national
market at subsidized price, i.e. on USD 2.00 a gallon of petrol and a 1.48 USD the gallon of
gasoline EXTRA. [4]

In the 2007-2013 period, the cost of a gallon of high octane gasoline import was the following:
in 2007 was $ 2.19, in 2008 was $ 2.59, in the 2009 was USD 1.89, in 2010 was USD 2.34, in
2011 was $ 3.14, in 2012 it was 3.43 USD and in 2013 was USD 3.14 the gallon of high octane
gasoline. [4]

To this cost of gallon of imported gasoline, you have to add the costs of marketing and
distribution in the domestic market, whose activity is done business marketers foreign and
national distributors. [4]

In the 2007-2013 period, the regime of the citizen revolution imported approximately 74 million
barrels of fuel at a cost of USD 8.677 million, and sold this product on the national market at
subsidized price, i.e. on $ 2.00 gal of high octane gasoline, the State lost $ 2.519 million in the
marketing of this product. [4]

3. Analysis of the Ecuadorian transportation sector

We designed a descriptive study, evaluating each of the socio-economic sectors (transport,

industry, residential, among others) of each of the energy sources existing in Ecuador during the
period 2008 to 2014.

GRAFICO

As can be seen from the statistical table that fuel consumption has increased in an immediate
manner in each period and this increase in consumption is also due to each of the strategic
sectors have changes especially in energy consumption; being the transport sector which
consumes the most fuel.

3. Decomposition analysis for the Ecuadorian transportation sector

The Ecuador has various socio-economic sectors such as transport, industry, residential and
others, being the sector transport the largest consumer of fuel in the country; the automotive
Park in the country is in constant growth, being the largest consumer heavy transport. Fuel
consumption affects the economy of the country as the Ecuador has the fuel subsidy policy
which causes great economic losses.

This marketing of fuels policy remains valid since the Government of arch. Sixto Durn Balln,
which has not been modified by the regime of the citizen revolution. [4]
It is unacceptable, the Ecuador as an oil-producing country, be at the same time an importer of
petroleum derivatives. [4]

To import a barrel of fuel: liquefied petroleum, diesel and gasoline has to export two barrels of
oil. [4]

To import a barrel of lubricants must be exported: ten, twelve, fourteen or more barrels of crude
oil, it all depends on the quality of lubricants. [4]

The fuel subsidy has a high economic cost for the country; having not time built a new plant of
refining of oil, than he already reality in a period of four years, the country was avoiding huge
currency output by the import of fuels. [4]

While not correct policy of the fuel price subsidies, it is not fair to expand the frontier of oil
exploitation, and less still want to extract crude oil from the ITT generating high environmental
impacts. [4]

What he worries about all this, is that the Ecuador is a marginal oil country, hardly produces
0.5% of the global supply, which is approaching the 90 million barrels of oil per day. [4]

The oil is an exhaustible natural resource, whose commercially exploitable reserves could last,
in the best of cases, for about twelve years, from which, if new commercially recoverable
reserves is not discovered, the country will become a net importer of oil derivatives and surely
will continue buying them to all these products at international prices. [4]

It will then be released fuel consumption in the various socio-economic sectors of the Ecuador.

Consumption by sector and source [5]

The following figure indicates the fuel consumption by sector and source:

Consumption by sector table [5]

The following chart indicates consumption by sector at different stages during the year 2008-
2014:

GRAFICO
* Note: Includes energy and non-energy sources.

In the table you can statistically see the amount of fuel consumed in different socio-economic
sectors of the country during the years 2008-2014, we observed that in each year the transport
sector is that most fuel consuming.

Consumption by sector [5]

GRAFICO

You can see graphically that during the years 2008-2014, the transport sector is the greater fuel
consumed during this period by increasing its consumption the 2.46% annually, in contrast to
the other sectors consumption has been minimal.

Percentage structure of consumption by sector (%) [5]

The following table shows the percentage that consumed different fuels in the country during
the years 2008-2014:

In the table you can see that in the course of the years 2008 to 2014, only the transport sector
consumes over 40% of fuels; being said sector the largest plaintiff fuel in the country.

Percentage structure of consumption by sector

GRAFICO

All economic sectors consume energy in different forms. The transport sector is the main
plaintiff of power, which highlights their faster growth. Other sectors such as industry, the
residential and the commercial have experienced more stable demand growth rates.

Transport
Transport (KBEP) [5]

Var (%)
2008 2009 2010 2011 2012 2013 2014
2014/2013
Electricity 6 6 6 6 6 6 6 -
Liquefied
8 72 88 75 82 73 86 17.5
Gas
Gasolines 9.195 9.658 13.759 14.875 15.611 16.452 17.228 4.7
Kerosene 2.543 2.479 2.483 2.520 2.430 2.748 2.765 0.6
13.20
Disel Oil 13.676 14.540 15.775 16.258 17.638 19.330 9.6
7
Fuel Oil 4.302 4.320 3.788 3.741 3.088 2.837 3.098 9.2
29.26
Total 30.211 34.663 36.993 37.474 39.754 42.513 6.9
1
The following table will be shown as it has been the consumption in thousands of barrels
equivalent of oil (Kboe) over the course of the year 2008-2014 in the transport sector.
Transport sector

kBOP

Electricity Liquefied gas Gasolines

Kerosene Disel Oil Fuel Oil

You can see that the consumption of thousands of oil-barrels equivalent (KBEP) over the course
of the years 2008 - 2014 has increased constantly in different types of fuel which generates the
country increase its general State budget, remain the diesel one of major fuels consumed
nationwide. [5]

Transport (Physical Units)

GRAFICO

We can see in the table that fuels which have been mostly consumed in the transport sector in
the years 2008 to 2014 have been diesel oil and gasoline, these being the main fuels that are
required in this strategic sector; which generates the country economic losses, since to obtain a
fuel barrel, the country needs to export two barrels of oil.

Percentage structure of consumption of the sector transport (%)

The following table will show the percentage who consumed different fuels in the country
during the years 2008-2014.
GRAFICO

Percentage structure of the sector transport [5]

GRAFICO

In the table can observe that the fuels of greater consumption in the sector transportation is the
diesel oil and gasoline which represent the 83.2% of the consumption to level national.

Consumption by type of transportation [5]

GRAFICO

Ground transportation is the greatest demand in the sector, with 86% of the total fuel consumed,
notably beating media maritime and fluvial (8%), air (6%). For this reason, the situation in the
road transport sector deserves a special interest and attention.

Consumption of gasoline by vehicle type [5]

The graph shows that the largest consumer of gasoline in the transportation sector is the single
49% passenger (cars, jeeps, taxis and motorcycles), as second the load weighing 25% (up to 15
ton trucks), followed by the charge light 24% (up to 3 ton trucks and cargo vans) and finally that
of passengers collective 2% (buses and passenger vans).

Consumption of diesel by type of vehicle [5]

GRAFICO
The graph shows that the largest consumer of diesel in transport sector is that of the load
weighing 75% (up to 15 ton trucks), second is the charge light 19% (up to 3 ton trucks and
vans), followed the rider collective 6% (buses and passenger vans) and finally the individual 0%
passenger (car jeeps, taxis and motorcycles).

In the period 2007-2013, the amount of losses in LPG were 3.736 billion USD, USD 5.054
billion diesel and gasoline high octane USD 2.519 million, total USD 11.309 million. What is a
loss for the Ecuadorian State, is the income and the gain for the foreign companies and
middlemen who sold the fuel to the Ecuadorian State to international prices. [4]

GRAFICO
4. Conclusions

The Ecuador has various socio-economic sectors with the transport sector the biggest consumer
of fuel, the advance of the transport sector is considered priority by the national Government as
a necessary condition for the change of the productive matrix. Transport services affect across
many sectors of the economy since the fuel subsidy represents 200% of the general budget of
the State.

According to statistics from the Central Bank, the subsidy of the main fuels (gasoline, diesel oil
and gas for domestic use) totaled $3900 million; which represented the diesel oil 51%, gasoline
35% and 14% domestic gas; in the course of the years 2007 - 2015 have been delivered $21558
million subsidy for fuels which have serious losses to the country since this money can be used
in other strategic sectors of the Ecuador.

The lack of refining capacity of crude oil in the country and the obsolescence of current oil
refining plants, are the main causes that seriously affect the national economy and especially the
balance of trade and payments of foreign trade, because in the period 2007-2013 have left the
country approximately $ 29,000 million for the purchase of fuel in the international market.
5. References

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] lnea]. Available:
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[2 M. Mediluce, ENERGIA Y TRANSPORTE.

]

[3 INEC, INEC, 2015. [En lnea]. Available:

] http://www.ecuadorencifras.gob.ec/transporte/. [ltimo acceso: 22 08
2016].

[4 H. LLANES, La Linea de Fuego, 25 Marzo 2014. [En lnea]. Available:

] https://lalineadefuego.info/2014/03/25/el-subsidio-de-los-combustibles-y-
la-explotacion-del-itt-por-henry-llanes/. [ltimo acceso: 05 07 2016].

[5 Ministerio Coordinador de Sectores Estratgicos, 01 2016. [En lnea].

] Available: http://www.sectoresestrategicos.gob.ec/wp-
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Acknowledgements