Tuesday, November 29

The Bank of Spain observes that the consumption of gasoline and electricity grew until June despite the rise in prices

The Bank of Spain observes that the consumption of gasoline and electricity in our country has increased in recent months compared to 2019 (before the pandemic) despite the increase in prices due to the Russian invasion of Ukraine. On the contrary, diesel fell in the first half.

The special tax on hydrocarbons collects until July 2% more than in 2019

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Aitor Lacuesta, David López and María de los Llanos Matea, economists at the institution, justify this resistance in the energy demand of families and companies in the midst of the inflation crisis for different reasons. The first, key, because of the belief that the escalation will be (or would be) temporary.

The second, due to discounts (such as the bonus of 20 cents per liter of fuel), VAT reductions (on the electricity bill) and price limits (such as the gas cap) of the Government. The third, due to the savings accumulated during the months of confinement and after restrictions due to COVID, especially by families with more income.

These three factors have favored that the explosion in demand after the pandemic itself has not been punctured despite runaway inflation. While, regarding electricity, the three experts from the Bank of Spain add that “a greater optimization of spending based on the hourly rate or the greater demand for electricity in the home as a consequence could also have helped to maintain consumption levels. of the increase in teleworking.

The institution’s report highlights the exceptional nature of the changes observed in fuel and electricity consumption during the current energy crisis. According to what they collect, previous calculations justified a drop in consumption of nearly 8% in recent months, according to the sharp rise in prices. However, the Spanish loaded 6.7% more gasoline in their vehicles in the first half, compared to 2019.

For their part, they used 6.5% less diesel, as the Treasury had already detected. Thus, diesel or professional gas oil showed levels that do not reach those of 2019 despite the general rebound of the economy and tourism and the service sector.

“In the case of electricity, the dynamics of its price and consumption since last year also point to a lower price sensitivity of its demand than historically estimated. Thus, while the average price of electricity for businesses and households —approximated based on data from the Tax Agency— has increased very significantly since the beginning of 2021, even taking into account the different measures deployed by the authorities, electricity consumption it has hardly been reduced ”, explain the economists of the Bank of Spain.

Demand has been suffering since the summer

These trends, observed in the first half, could have already changed. The price of oil has been falling in the financial markets in recent weeks. Futures trading on a barrel of Brent, the benchmark crude oil in Europe, have become cheaper by nearly 30%, to about 85 dollars not seen since January, after reaching over 128 dollars in March, the ceiling of the current energy crisis due to the Russian invasion in Ukraine.

The reasons are two, mainly. On the one hand, the lower demand and, therefore, the fear of a recession; and, on the other hand, the appreciation of the dollar, which indirectly makes oil more expensive in countries with other currencies, since it is traded in the US currency.

Fuels also fall, for the same reasons. Although less for that of being products that rise like a “rocket” when the raw material does, in this case oil, but that fall like a “feather” when this same resource falls. The explanation has to do with the chain of processes (extraction, transport, refining, sale…), which are quickly ‘infected’ by the increase in costs, but which then take much longer to adjust when it becomes cheaper crude oil on international markets. And in this energy crisis, the distortion of the Government’s discount of 20 cents per liter also intervenes.

Thus, the price of gasoline falls by 20%, to 1.70 euros per liter (without taking into account the bonus), from the 2.15 euros that it touched in June. And it is far from the pumps returning to the 1.50 euros that they marked in January. It is still 12% more expensive than before the war (the invasion began on February 24), just 20 cents, which different economists have shown does not translate exactly into the price.

Diesel falls just 15% from highs. And here there is a difference with respect to gasoline. Demand is suffering in the short term less because it is being used as a substitute for gas in certain industries in the eurozone. Among other things, because the price of gas does not let up due to the greater importance of Russia as a producer and its cutoff in supply to Germany and the rest of the north of the Old Continent.