Oil prices rose dramatically in 2022. It’s not just a widely watched barrel of oil. The prices of olive oil, a rather specialized commodity, also increased. These are the pits for Islington households looking for something to mess up their endives with – and a worrying sign of things to come.
The rise in prices was sharp. Last December, extra virgin oil – the most expensive type, made from cold-pressed olives – touched 5.5 euros per liter in Italy. That’s up 50 percent from the previous year and roughly double the price in 2020. Other olive oils rose even more.
Olive oil is a staple in producing countries – nonna’s pasta sauce floats in the stuff. And the growing popularity of the Mediterranean diet has increased the consumption of olive oil worldwide: it has doubled since 1990.
However, the increase is not due to the liberal use of oil. It’s an offer that has dried up. Juicy olives are a product of mild weather and some rainfall. The scorching summer in Italy and Spain – the two biggest producers – caused a 34 percent drop in European production, according to European Commission estimates.
The price increase can bite. This is not such a big deal for consumers in the UK and US, where olive oil is still a fringe – and elite – product. Per capita consumption there is only 1 liter per year. However, the Spanish, Italians and Greeks guzzle 10 liters per capita. According to this calculation, a family of four who likes extra virgin olive oil could spend around €220 a year. Now they have a good incentive to switch to cheaper oils, if only for cooking.
Companies that sell olive oil may also be squeezed as they try to pass on price increases to consumers. CVC-controlled Deoleo, a leading global olive oil producer with brands including Carapelli and Bertolli, emerged from a debt restructuring in 2020. Its EBIT margin is expected to fall to 3.15 percent of sales in 2023, according to S&P Capital IQ estimates. from 5.4 percent in 2021.
The olive harvest has good years and bad years. However, we fear that as climate change progresses, hot Mediterranean summers could become more frequent. That would add more expensive olive oil to the list of consequences – and spell bad news for salad days in Islington.
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