Shoppers may need to prepare for high oil prices. Specifically, olive oil prices.
Prices of the cooking oil are already at record levels, thanks to a drought last year in major producers like Spain and Italy, leading to a 60% increase since last June, according to the Financial Times.
The lack of rainfall has continued in 2023, which bodes poorly for this year’s harvest. Last month was Spain’s second-driest March this century, and this month is set to be the country’s driest April ever.
“If it does not rain very soon, we are going to have a poor crop again,” Kyle Holland, a vegetable oils analyst at commodity tracker Mintec, told the Financial Times. Spanish exporters expect a 10% drop in global olive oil supplies this year, compared with production in 2021, according to Reuters.
The increasing price of olive oil has had a knock-on effect on other goods that use it in their recipes. The price of a homemade pizza is up 22.5% year on year, driven by increases in the price of olive oil and other pizza ingredients, according to Bloomberg and its “Pizza Margherita Index.”
It’s not just pizza: The cost of making paella, according to Bloomberg’s calculations, is up 18.5% year on year, thanks to higher prices for olive oil, vegetables, and rice.
Spanish prime minister Pedro Sánchez reduced the value-added tax on olive oil from 10% to 5% last year, as part of a wider set of tax cuts on basic food items.
A (cooking) oil shortage
Cooking oil prices surged in the wake of Russia’s invasion of Ukraine last February. Ukraine is one of the world’s biggest producers of sunflower oil, and the supply disruption helped send prices of sunflower oil and its alternatives surging throughout the world.
The shortage had global repercussions. U.K. supermarkets briefly rationed purchases, while street food vendors in India and Nigeria ditched fried snacks.
Surging cooking oil prices also pushed governments to consider protectionist policies. Indonesia limited palm oil exports for brief periods throughout 2022 and 2023 to help secure domestic supply, fearing public discontent as prices surge.
Fortunately, overall cooking oil prices are trending down, with the UN Food and Agriculture Organization reporting that its price indices for oilseed, oil meal, and vegetable oil all fell in March, with oilseed prices falling to their lowest level since early 2021.
Food commodity prices are falling, too, yet high fuel, labor, and transport costs, as well as profit margins, are keeping prices at the grocery store elevated. And leaders don’t have high hopes that prices will start coming down anytime soon.
“I’ll be honest, food prices will be difficult until the end of the summer,” said French President Emmanuel Macron in an interview with Le Parisien on Sunday.