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Oil prices sounding alarm

Experts warn of economic downturn if oil prices continue to rise; GDP of Catalonia, Spain and Europe still far too dependent on the price of crude

The sustained increase of fuel prices in recent months has led to experts warning of the possibility of a downturn in the economic recovery. There are too many factors that depend on the evolution of oil prices. According to official data, just a year ago a litre of 95 octane super cost €1.168 on average. Now, the official average stands at €1.333. In the case of diesel, it has gone from €1.039 to €1.238.

The repercussions go far beyond the domestic pocket and threaten macro-economic indicators. The price of crude has risen 64% in just 12 months.

What is important to recognise is that along with low interest rates and direct liquidity intervention by the European Central Bank (ECB), stable oil prices have been pivotal in allowing the economic recovery to consolidate. With the ECB announcing that its intervention will end this year, the rise in the price of the Brent barrel, the standard oil reference marker, from $45 to $77 (peaking at $80, so far) in one year, this will most probably have an even greater impact on the economy.

Unions have also warned that the benefits to consumers of internal devaluation could be easily lost with oil prices being passed on directly in all areas of goods and services. For Catalonia, the added problem is that for our industry and services, energy dependence is high, at 95%, whereas for the rest of Spain it is only 75%. The existing fine balance is in danger of collapse and the ECB has also recently hinted that it may soon end its programme of purchasing public debt. Combining these factors, the question will be how to maintain the currently fragile economic recovery.

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