Going to the pump is becoming more and more expensive. Drivers' pockets have been suffering consecutive increases in the price of diesel and gasoline for two and a half months, which have already reached 1,751 and 1,668 euros per liter.. Fuels are immersed in a new price increase – this time, without bonuses at the pumps – shared with their raw materials. Oil is approaching $100 per barrel on an upward path that overwhelms all economic sectors and threatens to cause new increases in inflation.

The price of a barrel of Brent, which is the reference for oil in Europe, has exceeded $94 this week, a mark it has not reached since November of last year.. Since the end of June, the price of crude oil has increased by 30% and forecasts suggest that it will reach $100 per barrel before the end of the year.. From the energy consulting firm Tempos Energía, they even calculate that it could reach $110 this winter.

Two factors are behind the price increase: the reduction in production by exporting countries and the increase in demand.. “Right now the most important factor is the cuts that the producing countries are applying,” says Antonio Turiel, an expert in the oil market and researcher at the CSIC, who recalls that exporters have been turning off the tap for months with the aim of raising the price of oil. raw.

The Organization of Petroleum Exporting Countries (OPEC) agreed almost a year ago, in October 2022, to reduce its oil production by 2 million barrels per day, a restriction that in April they raised to 3.6 million, due to the resistance of the crude oil to rise in price. In June, exporters decided to extend this cut until the end of 2024, one year longer than initially planned.. There is also an additional cut in oil production of 1.3 million barrels per day by Saudi Arabia and Russia until the end of the year.

Production cuts

By reducing production, exporting countries pursue an increase in the price of crude oil. “They have long considered that the price of oil is inadequate and they want it to rise,” explains Turiel.. OPEC justifies the maneuver as an attempt to achieve greater investment, although the researcher points out that the reduction in oil production is inevitable, given its scarcity, beyond the restrictions voluntarily imposed by exporting countries.. “There is an inevitable rate of decline, which, no matter how much investment is made, will not be able to be prevented,” warns the researcher.

Despite the cutback strategy designed by the producing countries, an excessive rise in the price of oil can be counterproductive. “If the price is allowed to rise too much, it will force a recession. A contraction in economic activity causes demand to fall and, with it, also the price,” warns Turiel, pointing out that the barrel could still reach $110.. “The equilibrium price they are looking for is a high price, but not too high, although it is increasingly difficult to obtain,” says the physicist.. “We are entering a very delicate situation,” he adds.

The risk lies in the high dependence that exists in practically all productive sectors on 'black gold'. In fact, at the same time that OPEC has reduced production, world demand for oil has grown, mainly due to the reactivation of China after the pandemic, the increase in flights during the summer and the needs of the petrochemical industry, as they explain. from the Spanish Association of Petroleum Products Operators (AOP). The International Energy Agency (IEA) recorded a record in global oil demand of 103 million barrels per day in June and suggests that consumption will continue to increase in the coming years.

More expensive fuels

The rise in the price of crude oil is also pushing up fuel prices, although the price of the latter is also influenced by other factors such as their specific prices in international markets – independent of those of oil -, taxes, the cost of logistics and gross margins. Gasoline and diesel accumulate eleven consecutive weeks on the rise. Since they began their particular upward spiral at the end of June, they have risen by 10% and 16% respectively, reaching 1,751 euros per liter for super 95 and 1,668 euros per liter for diesel, according to data from the latest Petroleum Bulletin of the European Union.

“Right now what is most alarming is diesel,” says Turiel, who does not rule out that diesel will once again approach two euros, also affected by Russia's veto on the import of petroleum products.. “Diesel is the lifeblood of our system: it is transportation, it is mining and it is agriculture,” he explains.. The increase in diesel prices in the last eleven weeks has been more pronounced than that of gasoline.

Although both fuels remain far from the maximums recorded in the summer of 2022 for the moment, the super 95 has set a new record this week so far this year. It has recorded its highest figure since the end of November of last year, although at that time the aid of 20 cents per liter of fuel introduced by the Government in April was in force, after the price of oil in March would exceed $110 per barrel.

Gasoline and diesel were paid at the pump at the end of the third quarter of 2022 – after the Russian invasion of Ukraine – at more than 1.8 euros per liter, levels that have not been reached for the moment. From January 1, 2023, the fuel discount – which is currently 10 cents per liter – remains only for professionals and will be reduced to 5 cents starting in October, with no expectation that the bonus will be recovered for all drivers.

Rising inflation

“If the fuel prices we have now remain the same for several more months, they will end up being transferred to the rest of the prices, because they make logistics more expensive and that makes the entire chain more expensive,” explains economist Antoni Cunyat, professor at the Universitat Oberta de Catalunya (UOC) and the University of Valencia, regarding the risk that the rise in fuel prices will result in new generalized price increases. For the expert, the current situation is not comparable to that experienced after the start of the Ukrainian war.. “We have not reached the maximums that were reached then and we start from higher price levels, which means that the quantitative increase is not so high, but the key is how long these gasoline and diesel prices last,” qualifies.

According to data from the National Institute of Statistics (INE), the rise in inflation in the last two months has already been largely due to the rise in fuel prices.. In August the CPI grew three tenths of a percentage point year-on-year to 2.6% and did so for the second consecutive month, after having already increased four tenths of a point in July. Forecasts indicate that inflation will continue on this upward path until the end of the year. In fact, the Bank of Spain has revised its forecast for the Spanish economy this week and has increased its inflation forecasts for 2023 and 2024 to 3.6% and 4.3% respectively, due to the rise in energy prices and, in particular, , of the oil.

The banking supervisor has, however, maintained its forecast for underlying inflation, which is what discounts the price of energy and unprocessed food due to its high volatility, for 2023 at an interannual rate of 4.1%, although it has increased two tenths, to 2.3%, its estimate for 2024. This indicator, which moderated to 6.1% in August, attracts even more attention than general inflation when determining the impact of the rise in energy prices. “This is what we have to watch in the coming months.”. That will be the key to seeing the impact of fuel prices. If in a couple of months we see that the underlying price rises again, it will indicate that the increase in fuel prices is spreading to the entire economy,” concludes Cunyat.

Companies and households resident in Spain continue to meet their credit obligations despite the enormous pressure caused by the strong increases in interest rates undertaken by the European Central Bank (ECB) since July of last year.. The ratio of doubtful loans – those in which non-payments have been recorded for more than 90 days – remains at 3.5% of the total credit granted.

This is the lowest level of delinquency since December 31, 2008, when barely three months had passed since the collapse of Lehman Brothers that gave rise to a global financial crisis that mutated in Europe into a sovereign debt crisis.. The bursting of the real estate bubble in Spain was also in its first moments. On that occasion, non-payments began an upward path that reached its most critical point in 2014, with a delinquency ratio that reached around 13.4%, almost four times higher than the current level.

The volume of credit whose collection is doubtful for financial entities stood at 41,774 million euros in July, 400 million less than the previous month. Likewise, the total credit that families and companies accumulate with financial institutions decreased by 11,119 million euros.

The holding of bad debts at minimum levels compared to previous crises is explained by several factors. Firstly, because, unlike what happened after 2008, employment remains at historically high levels and the unemployment rate has fallen to lows not seen in 13 years.. It must be taken into account that, after the burst of the real estate bubble in 2008, unemployment reached 27% in 2013. With more than one in four Spaniards unemployed, the rise in defaults was inevitable.

In addition, it must also be taken into account that families and companies have not yet noticed the full impact of the interest rate increases, which are also expected to remain at high levels at least until the end of 2024.. Mortgages will continue to appreciate for several months yet. With the Euribor already at 4.2%, the forecasts of the main analysts suggest that this indicator will still remain at 3.5% at the end of next year.

The first vice president of the Government and Minister of Economic Affairs, Nadia Calviño, leaves the door open to extend some of the support measures for families and companies adopted in the last year to alleviate the effects of the war in Ukraine on the Spanish economy. Furthermore, he has shown his desire to present the General State Budget for 2024 in the event that the acting President of the Government, Pedro Sánchez, manages to be inaugurated if the attempt by the leader of the PP, Alberto Núñez Feijóo, fails this week.

Calviño spoke at the press conference after the Council of Ministers in which the vice president summarized the Government's vision of the state of the Spanish economy at times of uncertainty and slowdown in Europe.

Regarding a possible extension of the support measures, the vice president does not rule out the total or partial extension of the package also in 2024. “Between now and the end of the year, appropriate measures will be taken to continue on a path of containing inflation and supporting to those productive sectors and those families most affected,” said the vice president. Furthermore, he added that the Government will continue “in the same line” and will adopt “at all times appropriate measures trying to make efficient use of large public resources to respond to the impact of war.”

So far, the Executive has deployed measures for a total of 50,000 million euros of public money, distributed in six decrees. A response that Calviño has considered “very effective”. Among the aid that is still in force includes the tax reduction on the electricity and gas bill – which is almost at the legal minimum, the Iberian mechanism to lower the price of electricity, the reduction of VAT on certain foods basics or the reinforcement of the thermal and electrical social bonus.

However, the Government now faces pressure from European institutions, which are asking to withdraw generalized energy support and only retain measures focused on the most vulnerable.. The European Commission already recommended that Spain withdraw the measures last May and the European Central Bank (ECB) has urged eurozone governments on numerous occasions to withdraw energy support or, otherwise, expose themselves to greater risks. increases in interest rates.

However, withdrawing energy support measures would be an unpopular decision at a time when oil prices have begun a new climb that has led the Bank of Spain to revise upwards its inflation forecasts for 2023 and 2024.. In any case, the debate must be settled before October 15, the deadline for the Executive to present its Budget Plan to the European Commission, in which it must detail the main lines of income and expected expenses of public administrations for 2024.

The uncertainty about whether or not there will be General Budgets for next year adds more doubts to the process. In this sense, the first vice president has shown her desire to present a budget project for 2024, if the acting Executive manages to repeat in Moncloa. An approval that could be delayed until next year due to the tight deadlines. “We are a government in office, but a government that works. We have not stopped working. Hopefully we can present these General State Budgets,” said the vice president.

“Strength” in the midst of European slowdown

Regarding the evolution of the Spanish economy, Calviño has highlighted the country's situation in a context in which GDP growth in the eurozone is practically stagnant, if not negative in some countries. “We are in an international moment marked by uncertainty, with changes that are accelerating vertiginously. In this complex context, the Spanish economy is showing its strength,” said Calviño.

The vice president has highlighted that the Spanish economy is the one that grows the most among the large ones in Europe and registers the lowest inflation in the eurozone. Along the same lines, he highlighted that after the latest reviews by the INE, the Spanish GDP is now 2% above the pre-pandemic level.. However, it is important to remember that, although the INE review has reduced the gap that separated Spain from the rest of the countries, Spain continues to be the country furthest behind in the European recovery.

At a time when some autonomous communities are introducing tax credits in the Wealth Tax and the Inheritance and Donation Tax, and awaiting the ruling of the Constitutional Court regarding the Temporary Solidarity Tax of Great Fortunes and the Wealth Tax, This Monday, the General Council of Economists presented a report under the title 'Taxation of wealth: state of the art'.

Economists believe that the distortions that they can produce and the collection that can be achieved through the Wealth Tax make its suppression advisable – preventing the possibility of it being regulated by the regional treasuries as their own tax -, although it could remain as a declaration census.

However, economists believe that if it were decided to maintain the tax, it would be advisable to introduce changes, homogenizing the tax base and the exempt minimum in all territories.. And, for example, according to their calculations, if this tax were not subsidized in Madrid, the total collection would have been about 2,000 million euros, instead of 1,300 million.

The fiscal experts of the General Council of Economists have analyzed the collection data of taxes linked to wealth and, with practical assumptions, have revealed the inequalities that occur between taxpayers with the same wealth depending on their place of residence, also incorporating the latest modifications approved by the Autonomous Communities.

Thus they calculate, for example, that a taxpayer with an asset of 15 million euros, in 2023 would not pay anything for Assets in Andalusia, Extremadura and Madrid and, however, in the Valencian Community he would pay 401,234 euros, although this situation, temporarily, It is partially mitigated by the application of the Large Fortunes Tax.

The president of the General Council of Economists, Valentín Pich, has stated that if it is considered that Spain has a completely globalized economy, that the Wealth Tax is “anecdotal” in all tax systems and presents technical and equity problems in the territory, so it considers that the reasonable thing would be to eliminate it. In the case of the Inheritance Tax, Pich considers that, although it is also subject to debate, certain changes could be addressed so that it can play a redistributive role and to strengthen equal opportunities.

Given the appeals that have been presented against the Wealth Tax and against the Solidarity of the Great Fortunes, Pich has assured: that he “honestly believes that it is an unsustainable situation that is unnecessarily straining the legal system and introducing too much institutional conflict.”

The president of the REAF-CGE, Agustín Fernández, expressed that “the Temporary Solidarity Tax of Great Fortunes should not be made permanent because it is configured as a patch to the Wealth Tax and has been approved following a unique parliamentary trajectory.”

As economists have argued, the reason why wealth is taxed can be found in the fact that it is a manifestation of economic capacity different from that of income and consumption, and it can complement the tax on both manifestations.. “As a country, we are totally immersed in the global economy and, therefore, we compete with the rest of the countries in Europe and the rest of the world, so our economic regulation and, within this, tax regulations, do not may distance itself too much from the prevailing standards,” they stressed.

Thus, the General Council of Economists has insisted that it is not about competing fiscally downwards, which has not been a tax policy used in the country, but rather that taxes, at least, do not penalize certain taxpayers being able to come to reside in Spain or not encourage others to relocate.