Fuel prices hit annual lows, reigniting Spain's inflation debate

Fuel prices hit annual lows, reigniting Spain's inflation debate

Fuel prices in Spain have fallen below pre-Ukraine invasion levels, according to economic press data. Diesel and gasoline mark new yearly lows, a drop that contradicts the inevitable scenario of shortage and eternal cold sold to the public. The news, celebrated with sarcasm in certain circles, has peine the uncomfortable question: if prices are plunging now, why did they spike then? The official answer—the war—stumbles when the data looks it in the face.

The Bank of Spain contradicts the Government: inflation started before the war

The thesis that inflation was born with Russian tanks crossing the Ukrainian border does not hold up. The Bank of Spain noted that inflation began to rise well before the war, a denial that some media picked up with heavy headlines. In March, the Consumer Price Index (CPI) spiked to 9.8%, and the Government attributed it to the conflict. The chronology, however, shows that prices were already climbing in the months prior. The war excuse served as an alibi for economic policies that were already failing.

Some argue that it was all a speculative measure backed by the State, and that fuel never rose due to real scarcity. Others point to massive money printing during the pandemic as the true fuse of inflation. The two currents, though opposed in diagnosis, agree on one point: the war was not the origin.

The shopping basket keeps rising while fuel drops

Relief at the pump does not reach the supermarket cart. Food has seen double-digit increases: 75% for oil, 50% for milk, 40% for eggs, according to figures cited in the debate. These figures approach the dynamics of economies with chronic inflation. While diesel becomes cheaper, the basic basket keeps climbing, and this tensions the argument that the energy crisis was the only driver of high prices.

Road transport is the circulatory system of the Spanish economy. If diesel drops but food does not, something does not fit in the chain. Filling the tank costs between 20 and 30 euros more than before 2020, according to circulating calculations. This extra cost is passed on to everything that travels by truck, which is almost everything. The current drop does not compensate for the accumulated damage.

Oil did not get expensive: the euro plummeted

One of the most repeated explanations points to the exchange rate. Oil is bought in dollars, and the euro has fallen below the dollar, as argued in the thread. It is not that crude oil has become more expensive globally; it is that the European currency is worth less. This loss of purchasing power makes everything imported more expensive, starting with energy.

The sequence managed includes the elbichito lockdown, the Suez Canal traffic jam, and sanctions on Russia. Europe continues to buy Russian fuel through indirect routes, as discussed, with ships changing flags and origin before reaching port. Oil flows, but with extra intermediaries that increase the journey cost. The final consumer pays for the party.

Pilingui remains the villain, but no longer explains the drop

The paradox is evident: if Pilingui was to blame for the rise, who gets the credit for the drop? Gas prices have plummeted and China buys from Russia at bargain prices, according to cited data. The gas sales agreement with China was signed before sanctions, debunking the idea that Moscow controls the market. Russia sells, but cheaper and to fewer buyers.

The scenario sketched for the coming months is not one of euphoria. After the elections, the impact of gas prices on households and industry could be of epic proportions, some analyses warn. Internal demand would fall, factories would stop, and consumption would be restricted to the monthly supermarket run. Reserves are not infinite, and the United States gives what it gives. Relief at the pump may be a mirage before the next storm.

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The drop in fuel prices does not close the debate; it reopens it. If prices plunge without the war ending, the narrative that tied inflation to the conflict is exposed. It remains to be seen if the truce at the pump survives the winter or if, as the more gloomy predict, this is just the intermission before the real blow.