Gasoline gives no truce and triggers inflation in September

BarcelonaThe rising cost of fuel—caused by the sharp increase in oil prices as a result of the war in Iran—is showing no signs of easing and is driving up inflation in Spain. Thus, this September, the cost of living for families has reached 4.9% higher than in the same month last year, the highest rate since February 2023, according to preliminary data from the Consumer Price Index (CPI, the indicator that measures the evolution of prices for goods and services consumed by households) released this Tuesday by the National Statistics Institute (INE).

This 4.9% is six tenths higher than the year-on-year rate recorded in Spain in August, which was 4.3%. However, between last month and this September, the CPI has increased by 0.3%, four tenths less than the 0.7% growth between July and August. As for underlying inflation—which excludes energy and fresh food, which are more volatile—it stands at 3.1% annually.

Since last March, when the United States and Israel militarily attacked Iran, the price of energy has skyrocketed and has once again pushed up the entire shopping basket for families, not only in the country but all over the world. The closure of the Strait of Hormuz—through which approximately 20% of the world's oil and natural gas transited—by the Iranian government in response to the war has further contributed to the rise in energy costs.

This global energy price hike is what explains a large part of the price increases in Spain, where the current inflation rate, nearing 5%, far exceeds the 2% annual target set by the European Central Bank for the medium and long term. In this regard, in the seven months following February—the last month before the conflict, as the attacks on Iran began on the 28th—consumer prices for goods and services across the country have already increased by almost 3.7%, which suggests that, if the situation in energy markets continues as it is, the CPI could remain at figures well above those set by European monetary authorities.

New aid measures

In this context, the Spanish government "has already approved two packages of measures," it recalled this Tuesday in a statement sent to the media, although most of the measures from the last one that are still in force expire this Wednesday. "Thanks to these measures, inflation managed to moderate by a point for some months and households have been able to compensate for around half of the rise in gasoline and diesel prices," the executive's note adds.

Faced with the end of these measures, this very Tuesday the Council of Ministers must move forward with a new legislative package to mitigate the effects of inflation. Within the package, it is foreseeable that the government will maintain diesel aid for transporters, farmers, and other professional groups that consume it for their activity: "support for the countryside and transport helps to contain the contagion of the energy shock to the rest of prices," says the government, which boasts that between March and August the cost of food in Spain has become 0.6% cheaper.

The last inflationary crisis took place between the years 2022 and 2023, also as a result of a shock in the global energy supply. In that case, it was due to the Russian invasion of Ukraine that began in February 2022, which caused prices in Europe to hit a ceiling in the summer of that same year, with annual increases that exceeded 10% both in Catalonia and in Spain and 20% in some European countries highly dependent on natural gas coming from Russia.

For the moment, then, the figure of 4.9% recorded this September is still far from the highs recorded in the inflationary episode of four years ago. It must be added, moreover, that just as it happened when Russia cut off the supply of natural gas to Europe, in this case, Spain and Portugal have a smaller dependency on gas from the Persian Gulf, since a good part of the gas they consume reaches the Iberian Peninsula via pipeline from Algeria.

Thus, although the price of crude oil and, by extension, fuel does impact families' pockets, the fact that the State does not have natural gas supply problems—furthermore, it is one of the European countries with the most regasification plants—means that the cost of this fuel and the electricity bill—gas is used to generate electricity—should not, in theory, soar as much as in many other countries in the European Union. In addition, among the measures approved by the government, there is also a price cap on gas for consumers.

Increased cost of tourism

Beyond fuels, the INE has also highlighted the cost of tourist packages as one of the elements that explain the high inflation rate, since, although they have become cheaper this month—as is usual with the end of the summer holidays—the price reduction has been lower than that recorded in September 2024. The state statistical institute will publish the more detailed CPI data for September, broken down by autonomous communities, on October 14th.