Update Post: November 28, 2023 10:56 pm
Last week, the Independent Authority for Fiscal Responsibility (aAIReF) placed the escalation in the price of oil as one of the main concerns for the national economy in the medium term, even more so than the persistence of the underlying oil price, which still remained in place in recent years. 6.1%. In its latest Quarterly Report, the Bank of Spain (BdE) has worsened its inflation forecasts, which will be more persistent and higher between now and 2025 than it had initially contemplated, in light of the tensions reflected in international crude oil markets. . .
‘Black gold’ has appreciated more than 30% since mid-June and has surpassed the barrier of 90 dollars, in a context in which global demand reaches record levels and in which supply cuts by Some OPEC producers and partners such as Russia, Mexico, Malaysia and Bahrain continue to strain the market. Although the most intense rise in the price of the raw material is behind us, investment banks such as Goldman Sachs or entities such as Bank of America do not rule out that oil could reach the level of $100 between now and the end of the year.
That price level, $100 per barrel of Brent, the benchmark oil in Europe, marks the limit beyond which the Spanish economy suffers, according to different sources in the sector consulted by ‘La Información’. From that point, growth is pressured downward and inflation upward. The reason is that fuels represent around 5% of the CPI index, and there are also its indirect effects, given that fuels support practically the entire national productive apparatus.
The effects of the rise in oil, according to the Bank of Spain
The estimates published last week by the BdE point in that direction. The organization led by Pablo Hernández de Cos estimates that energy products will become 19.5% more expensive next year, seven points more than it had predicted in June, when it published its previous calculation. This scenario is what supports the upward revision that the entity has made of its inflation forecast for next year, which places an average of 4.3%, seven tenths above what it calculated before the summer.
The change gives an idea of how quickly the economic context has deteriorated, especially when the demand for crude oil represents almost 50% of all national energy consumption. The Bank of Spain itself explains to this newspaper that each 10% increase in the price of oil would subtract 0.07 points from the growth of the national economy in the first year, 0.18 points in the second and 0.25 points in the third. Private consumption would be affected progressively from 0.11 points in the first year of the forecast to 0.39 points in the last.
This is true for oil, but also for other raw materials on which Spain is equally dependent, such as gas, which has been pressured by recent episodes such as the extensions of maintenance programs for Norwegian fields or the strikes in the of Australian liquefied natural gas (LNG). CaixaBank Research calculates that an average annual increase of 10 dollars per barrel for oil and 30 euros/MWh for gas would entail (assuming that the demand for both raw materials was not able to adjust to this short-term price increase) an increase in net imports of nearly 8.1 billion euros, equivalent to 0.6% of GDP.
Gasoline, at its highest levels of the year
In terms of growth, an increase in the price of energy of that magnitude would subtract five tenths from the annual increase in Spain’s GDP, they calculate in the entity’s research service. “Overall, we believe that OPEC will be able to keep Brent in a range of $80 to $105 in 2024 by taking advantage of the strong growth in global demand focused on Asia (1.8 million barrels per day) and exercising its pricing power assertively,” Goldman Sachs analysts say in a report published last week.
At street level the tensions are also palpable at the pump. The price of fuel has accumulated once consecutive weeks of increase in Spain and only since the beginning of summer has it skyrocketed by 16%. The increase recorded in recent days has led gasoline to reach its highest levels of the year, at 1,751 euros per liter, a level that it had not reached since last November, when the application of 20 cents per liter approved by the Government was still in force. The withdrawal of the social shield – of measures such as the reduction of taxes on electricity, gas or food or free public transport – is another of the future challenges facing the Spanish economy in a context of international weakness.