“The situation is far from being what we experienced after the start of the war in Ukraine.” The Government tried to convey this Tuesday the differences that separate, in economic terms, the first stages of the war in Iran from that of four years ago.
Neither are the effects the same, insists the Executive, nor is Spain's starting point. Since then, when gas prices shot up to never-before-reached limits the price of electricity, Spain has raised a renewable ‘shield’ which makes it, assures the Government, less vulnerable to these fluctuations. Less dependent and more competitive compared to the rest of its European neighbors.
“We arrived with our homework done,” summarized the Minister of Economy, Carlos Cuerpo, who appeared before the media in a press conference after the Council of Ministers to report on the economic impact report he had brought to the meeting along with, among others, the Vice President for Ecological Transition, Sara Aagesen.
More competitive companies
“We have created a shield in terms of energy sovereignty, which translates into electricity prices for our SMEs”. As the minister explained, these costs have meant 20% less for Spanish companies than those that have had to assume on average in the euro zone, representing a gain in competitiveness.
Alongside it, the accumulated growth data and affiliation to Social Security. The minister assured that in these first two weeks of March the pace of affiliation grew more intensely than in the previous month. The country is scratching 22 million Social Security affiliates, an evolution that for now has not been cut short by the missiles flying over the Middle East.
Aagesen explained the improvement in Spain's energy position in the greater weight of renewable energies in the energy mix, which already reaches 57% of all generation in Spain. And boasted of regasification, storage, and processing capacity for petroleum products compared to other countries.
The vice president boasted about renewable generation capacity at a ‘sweet’ moment when the longest hours of sunshine and good weather are boosting photovoltaic production and flattening electricity prices in the wholesale market –to which the regulated household tariff is linked--. “The sun and wind will never be blocked by the Strait of Hormuz,” Aagesen illustrated.
Part of the package of measures being prepared by the Government is aimed at intensifying the deployment of renewable energies and the electrification of the economy. The Executive has already confirmed that the support measures will be accompanied by incentives for actions in energy efficiency, electric mobility, and aerothermal energy and everything indicates that it will recover, if not expand, the battery of tax reductions that it has been including in the omnibus decree-law –and which Congress has repealed up to two times--.
Gas and crude shot up, but not so much
Nor is the situation the same in raw material prices. Crude oil and gas have soared since the attack by the United States and Israel on Iran, but they started from lower prices and have not reached, at least for now, the records of four years ago. Gas, which exceeded 200 euros/MWh in the early stages of the war in Ukraine, was twelve days after the conflict broke out at 126 euros/MWh. Today it stabilizes at 51 euros/MWh.
Nor the price of crude, although the trend is not so optimistic. Even starting from a more advantageous situation, the price of Brent barrel, at almost 103 euros, approaches 112 euros that it marked at this point four years ago.
It is, precisely, these prices that pose the main threat to the Spanish economy. Despite the fact that, in principle, the increase in raw material prices should not have been transferred so soon to Spanish stations, prices have risen since the first day of war.
The rise in prices is already noticeable
The Government has requested the National Commission for Markets and Competition (CNMC) to strengthen price monitoring, increasing the frequency of its reports, and supervising possible abusive behaviors at gas stations.
Since the start of the war, gasoline has become 16% more expensive, diesel 28% and, what is more pressing, fertilizers between 40% and 50%. This is what motivates the Government, explained Cuerpo, to prioritize the transport and agri-food sector, in the compensations it will approve this Friday.
Also to households and industrial sectors more exposed to the increase in energy prices. But, fundamentally, these two sectors. The reason? The repercussion that this increase in costs may have on the rest of the value chain and, ultimately, the shopping basket.
From escalating the price increase, the energy difficulties would come to translate into a price crisis, the second in four years.