If you live in Spain you’ve probably noticed that the price of olive oil has skyrocketed over the last year or so.

According to the latest CPI data released this week by Spain’s National Statistics Institute (INE), the price of this staple Spanish product was a whopping 52.5 percent more expensive in August compared to the same month in 2022, which is the highest year-on-year increase in over twenty years.

Looking back a little further, from March 2021 to August, the price of olive oil has risen by an eye watering 114.8 percent. As such, the so-called Spanish ‘liquid gold’ is becoming increasingly unaffordable for many Spaniards, and in a country that uses it for everything from dressing salads to making tortilla de patatas, for many olive oil has gone from a staple ingredient to a luxury.

This pressure has been further highlighted (and enraged many Spanish shoppers) because olive oil prices are significantly lower abroad, despite the fact that Spain is the world’s biggest olive oil producer.

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In fact, Spain produces more than half of the world’s entire olive oil supply.

The sector is very export-oriented, with a little under 80 percent of the oil made in Spain sold to foreign markets — in 2020/21 this was more than one million tonnes of oil, according to a report by Caixa Bank. 

So how can olive oil cost so much more in Spain (in some shops it is now €10 per litre) than, for example, in Ireland, where consumers recently reported prices of €4.70 per litre?

Why are Spaniards paying so much for olive oil?

Teresa Pérez, manager of Interprofesional de Aceite de Oliva Español recently attempted to provide an answer to this question to Spanish TV station Cuatro. Pérez said that in essence the problem is in the amount of olive oil Spaniards consume (around 11 litres per person per year) and the pressure this puts on product ‘rotation’ for sellers.

“Nowadays in Spain we have a much higher product turnover and therefore prices at the source are passed on to the consumer earlier,” Pérez explained. This means that in Spain, where olive oil consumption is much higher than most countries, larger stocks of olive oil are required, which means they are more vulnerable to price volatility.

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That is to say, if supermarkets and other sellers have to buy olive oil more regularly, they will be more exposed to price rises and likely to pass them onto consumers.

Pérez says that in Spain each person consumes 700 millilitres of olive oil every three weeks: “This means that in three weeks they will have to go back and buy another bottle. Whereas it will probably take an Irish person 10 months to go back to the point of sale for a bottle.”

The lower price on the shelves of Irish supermarkets means that the bottle was probably not purchased recently by the supermarket, as is the case here in Spain due to the high demand, but could have been purchased more than a year ago and therefore at a lower price than it is today. Supermarkets therefore do not need to recoup such stark price rises from suppliers and can therefore continue to sell it at a lower price.

Equally, the export contracts producers sign with the main oil importers abroad are usually signed on a long-term basis, so the contractual terms and prices are set according to the economic situation at the time.

In short: foreign consumers are better insulated from the volatility of price changes, something Spaniards and Spanish supermarkets, who are forced buy olive oil much more regularly, are not.