The price of a barrel of Brent oil is once again looking closely at the $100 level for the first time since the weeks following the Russian invasion of Ukraine at the end of February 2022. Large firms such as Bank of America assume that the ‘ Black Gold’ will exceed that level before the end of the year if OPEC+ (the cartel and partners such as Russia, Mexico, Malaysia and Bahrain) maintain the current supply cuts and the context of strong demand in Asia continues. This snip, applied conscientiously by the producing countries, and the tensions that are looming in the coming months cool the economic prospects for Spain, a country that is a net importer of crude oil – in 2022 it acquired 63.6 million tons of the material from abroad. cousin- .
The Government’s latest forecasts, based on the general elections of July 23, assumed an average cost of oil of 89 dollars per barrel this year and 85 dollars next year. So far, the assumed value for 2023 seems relatively high given the evolution observed during the second quarter of the year (around $80). A price level around 90 dollars per barrel would still be consistent with a growth environment of around 2% of the national economy, as predicted in May by Pedro Sánchez’s Executive, Miguel Cardos points out to ‘La Información’. o, Chief Economist for Spain at BBVA Research.
The effects of high oil on global activity are different depending on whether its escalation is due to a strong increase in demand or supply factors. In the first case, the advance of international trade would be able to offset the negative impact on the costs of Spanish companies. In the second, the price increase mainly benefits the producing countries, which increase their margins. According to Cardoso, the real price increase corresponds to the second type.
The entity calculates that each increase of around 10% in the price of crude oil – going, for example, from an average level of about 85 dollars to between 90 or 95 dollars – will subtract three tenths from the GDP growth and will raise inflation to up to at a point, as long as its origin is in supply restrictions. “The impact would be uneven on the economy, with the effect being greater on fuel-intensive sectors, such as industry or transportation,” says the Chief Economist of BBVA Research.
The added problem of the depreciation of the euro
To the previous scenario, with a crude oil price that has increased around 17% in dollars in just two months, is added a depreciation of the euro against the dollar of 5% (oil is exchanged in dollars). From functions they rule out that this scenario is going to change in the short term. Raymond Torres, director of Coyuntura, emphasizes the fact that the producing countries are maintaining an agreement to cut production that on previous occasions was very difficult for them to comply with. Thus, Saudi Arabia is strictly applying pumping cuts and Russia is reducing its production.
These movements have unbalanced the market and aim to raise the price in a context in which importing countries have explicitly declared that they want to do without oil within a decade or, at least, sharply reduce their imports in the process. . des carbonization of their economies. “We can even expect an additional rebound in the price of oil, which could even reach $100,” agrees Torres.
Given that the markets expect the euro to lose a little more ground against the dollar due to the worse prospects for the European economy compared to the US economy, analysts assume that there will be an additional rise in fuel prices. This implies that in the coming months there will be significant pressure from European consumers to extend or maintain the aid that was granted at the height of the inflation outbreak last year and that has been extended this year.
Extraordinary aid and the extension of the Budgets
“This in a context of budget extension is very difficult because new aid could not be granted and previous aid would have to be dismantled,” adds Raymond Torres to this newspaper. These are aids worth 10,000 million euros that include, among others, those approved to compensate for the rise in the price of electricity or fuel subsidies, among others. The problem is that this occurs in a context marked by the change of direction in the monetary policy of the European Central Bank (ECB) to confront inflation.
At Funcas they do not rule out that the Euribor, the reference for variable rate mortgages in Spain, will rise even a little more taking into account the latest increase in interest rates announced by the issuer at its meeting last week. The indicator could practically reach 4.5% and make the mortgages of families that have borrowed at a variable rate even more expensive. Last Friday it reached 4.16% in daily rate, compared to the 4.05% with which the month started, after the entity communicated its latest decision. “This could also require very specific and selective help, not for all those with mortgages and not for all those with variable rates, but for the most vulnerable,” Torres ditches.
