¨The oil price hike is not only generating chaos in countries due to food riots but has also created transport strikes in Europe. There are shortages and even one death, ¨ says Paola Pecora.

Buenos Aires, Argentina June 12, 2008

The prophecies regarding oil seem to be coming true. The barrel remains over $ 130 and is creating innumerable conflicts. Worse still, there are no short term fuel alternatives that can replace oil. OPEC states that speculators have been driving up prices at a time when supply and demand don’t seem to justify it.

It seems that biofuels are not the answer to the energy question but rather the source of a new problem. This is demonstrated by the current global debate regarding accusations that these alternatives to oil are actually creating a worldwide rise in food prices…. The situation is generating conflicts as much as, or perhaps greater than, the ones caused by the rising price of oil in itself.

In Europe, the oil price is generating massive unrest. Spain, is experiencing the worst situation in the Eurozone. In May, Spain’s year-on-year inflation variation reached 4.6%. This is also a problem for the competitiveness of its economy. In order to have an idea of the gravity of inflation rates, it should be noted that their current levels have not been registered since 1995…. And the price of oil is clearly one of the main causes of this phenomenon. It would seem that the rate of inflation is settling in at over 4% and with this being its fourth month at that level, it is expected to remain there.

However, the main problem for Spain is not the increase of oil prices itself, but rather the outbreak of situations created as a result of those rates. For example, the truck drivers’ union has been on strike because of the strong rise in the price of fuels and this action has already been at the expense of one life. This strike is by far the worst one that José Luís Rodríguez Zapatero has had to face since he assumed the presidency of Spain in March 2004.

The strike has generated shortages and widespread panic for Spaniards who have already begun stockpiling food. On the BBC’s Spanish site one can read about the impact of these shortages in Spain: “We went to the supermarket to buy groceries but there was nothing fresh. All the meat counters were completely empty. There was little fruit and no dairy products such as yogurt or milk… people are stocking up in case there is going to be a shortage”.

Zapatero proposed a series of thirty measures to alleviate the situation with the truckers’ union due to the constant rise in the price of fuels. These proposals were rejected due to the union’s demand for “minimal tariffs” on transport services so that the rise in the price of fuel could be offset by a decrease in transportation costs.

Spain’s current situation is much more complex than simply a conflict caused by the increased price of fuel. In the “Financial Times” Leslie Crawford noted that “It is hard to bid farewell to an era, particularly when it has been as dynamic and prosperous as the one drawing to a close in Spain”. And now, after the collapse of its 10-year construction boom, the Spanish real estate sector is significantly impacting the economy.

Using research conducted by the University of Barcelona, Leslie Crawford goes on to explain that the backlog of a million unsold homes will take about two years to clear. This situation indicates unfavorable prospects for this sector for the next few years.

In the face of economic deceleration and an increase in inflationary pressures, Spain’s government seems to lack a monetary policy that it can effectively wield to resolve its current situation…. and Spain will have to act quickly if it wants to avoid seeing this scenario worsen over time.

Next Wednesday, Zapatero promised to meet with union and business leaders to discuss the present economic crisis that is affecting Spain. Is a new agreement with Moncloa Palace possible? It seems that the economic situation is requiring the solidarity of all of Spain’s sectors in order to overcome the crisis. In the past Spain has experienced success combating situations such as this and is prepared to allow history to repeat itself… Will all the various sectors be willing to yield, to obtain an economic recovery in Spain?

We will meet again tomorrow,

Horacio Pozzo