Energy costs already forcing prices to soar while consumption on Ibiza falters

The upward spiral of crude oil “has repercussions in all sectors”, according to José Antonio Roselló, vice-president of the CAEB, because “it is a type of product that has a lot of reach throughout the economy” and that, therefore, “quickly makes the shopping basket more expensive”. The problem, he warns, “is that, in general, it is a type of service that we cannot do without. In other cases, a certain product rises and demand shrinks. Not here. Demand is quite inelastic for the consumer. It goes up and you have to swallow it, there is little the consumer or the businessowners can do to avoid its impact, although he warns that “there are limits. Sometimes you have no choice but to pass on these increases if you want the company to survive. Other times you have to swallow them”. Hence, not all sectors will be able to pass on the increase in costs to their prices: “The one that will have the most difficulty will be the hotel industry because tourist demand is starting slow down a little in Ibiza”.

Not all sectors will be able to pass on the increase in costs to their prices: “The one that will have the most difficulty will be the hotel industry because tourist demand is starting to slow down a little in Ibiza”

This phenomenon, says Roselló, “is not only caused by the war in Ukraine, which only exacerbates it”. It has been going on for a long time and could cause a problem for tourism, as “it will increase costs for wholesalers, who will pass them on to retailers. Logically, there will be an increase in air fares. If they don’t raise them, they won’t hold up”.

One of the sectors that could not stand it any longer was the transport sector, where diesel represents “a third of the costs”, says José Raya, president of the Association of Freight Transport on Ibiza. According to his calculations, between January 2021 and today, this fuel has risen by 42%. They resisted last year without touching their prices, until they said enough is enough: “Now we are raising them between 10% and 20%”. When they communicate this, “some customers don’t call back; others understand and continue working. But nowadays there is no other option. Prices are very, very, very tight, after these years of pandemic. Either you increase prices or you close. It’s just a matter of time.

Between January 2021 and today, diesel has risen 42%. Transport resisted last year without touching prices, until it has said enough is enough: “Now we are raising them between 10% and 20%”

In spite of everything, they maintain their staff: “One of the reasons is that there is always a lack of personnel in this sector: mechanics, electricians, drivers… It is an endemic problem caused by housing and because everything is so expensive here. We keep them on a salary basis. There is no other way.

Double to fill up

For the moment they have withstood the onslaught in the fishing sector, although Pere Valera, commercial director of Peix Nostrum, gives “one month” to change the situation or sardines will be priced like barnacles. “We are working at a loss. This is not viable. Until now we have not passed on the rise in fuel prices because we always maintain them until we are cornered”.

A liter of fuel (which is subsidized) now costs just over one euro: “In August it was 0.47 euros”

A llaüt consumes, under normal conditions, “300 to 500 euros of diesel per week, if it goes out every day and depending on where it goes to dock”. A trawler, much more: “In a single day of fishing, in good seas, from 600 to 700 euros”. A liter of fuel (which is subsidized) now costs just over one euro: “In August it was 0.47 euros”. They are less affected by the soaring price of electricity thanks to the fact that they have solar panels: “Otherwise we would have to close down. We are saving ourselves thanks to these panels”.

Valera fears that if all the cost increases are passed on to fish, “people would not eat it”. Already last December 1, prices increased by 10%: “We had not applied a generalized increase since 2012. Since then, the CPI alone has risen in those years by more than 14%. We were forced to do it.”

“It affects everyone. Everyone, directly or indirectly, suffers from it, from kindergartens to bars and cafes, where they consume a lot of power to maintain the refrigerators, light and heat or air conditioning. The same goes with shops”, explains Àngels Marí Puig, general secretary of Pimeef. Even Alfonso Rojo himself, president of this organization and food wholesaler, has noticed it: “He has a lot of cold rooms. It has almost doubled the electricity bill in just one month”.

Hence, some sectors have already communicated that either they have either raised prices or they will soon do so: “In 2021, most companies maintained them because we came from a year, 2020, without activity as a result of the pandemic. But they are already forced because they are not covering their costs with their sales prices”.

Trade has already recorded “increases of around 10% on average, and rising”

Trade has already recorded “increases of around 10% on average, and rising”, according to the sector’s representatives to Àngels Marí: “From July there will also be significant increases,” they warn. In the marine sector they are “between 5% and 10%”, although they warn that “there is no doubt that the rise in the price of electricity, aluminium and transport will have to be passed on before the summer”. The rise in prices could also affect consumption.

Parked Cars

A member of the Pimeef restaurant sector told Marí that over the last two weeks he has noticed “a drop in sales in the midday menu”. Mariano Matutes, administrator of Carburantes Ibiza, goes further. His company, which controls numerous petrol stations on Ibiza, has already seen fuel consumption fall by around 20%: “With these prices, consumption is falling,” Matutes says. We have seen a 20% drop in sales. People don’t press the accelerator so hard, they consider whether or not they will go somewhere or whether they go by bus or walk. There comes a time when this ends up being unbearable for a family”.

“With these prices, consumption is falling. We’ve seen a 20% drop in sales. People don’t press the accelerator so much, they consider whether or not they go somewhere or whether they go by bus or walk. There comes a time when this ends up being unbearable for a family”

The million-dollar question to a businessperson who deals with the gasoline market: Are you getting richer with these price increases? “What I’m really looking forward to is for this to stop. The more the price rises, the more our margin shrinks,” he stresses. “We receive a commission per litre sold. As 80% of the customers pay by card, the higher the price, the more commission we pay for charging through that card. That’s how the commission we receive goes.

And the prices are not set by him, but by the oil company, which tells him daily how much to charge for each liter and assures him that it is more expensive in the archipelago because the fuel has to be brought in by tankers. Matutes explains that more than 50% of the almost two euros we pay for a liter of 95 gasoline are taxes. One part corresponds to the special tax on hydrocarbons (32% of the retail price), another to the value added tax (VAT, 21%). And then there is the ‘céntimo sanitario’: “Here it continues. If the Balearic Autonomous Community were to sacrifice the ‘céntimo sanitario’ and the Spanish Government were to cut the 21% VAT, the price could be reduced by up to 30%.”

Matutes handles almost all the brands (Cepsa, Repsol and BP) and has just opened a low-cost petrol station: “It allows me to cut a few cents depending on the supplier. But not much, unfortunately. He assures that he has more and more customers there every day. Our confidence,” says Matutes, “is that this will last no more than a month. We can’t put up with this situation any longer”.