Ban on Iranian oil sends fuel prices skyward, historic highs

"Spain will make a major sacrifice to back this measure." This was the immediate thought uttered yesterday by Minister of the Exterior José Manuel García-Margallo as countries in the European Union agreed to veto imports of Iranian crude.

The sacrifice started yesterday as gas prices skyrocketed and hit new historic highs. Filling up the tank will cost an average of 1.367 euros per liter on average, up from 1.33 previously. Diesel went from 1.33 to 1.36 euros per liter.

The price increase is the first result of the Iran oil embargo. Iran is an important oil supplier considering that Iranian petroleum equals 14.7% of Spain's oil imports. Only Greece buys a higher percentage of its oil from Iran. Reactions on the street and on social networks obliged the Ministry of the Exterior explain the sacrifice and assure hours later that Saudi Arabia and other Persian Gulf countries will guarantee crude supplies to countries in the EU, particularly Spain, without increasing prices.

Bad omens

According to calculations, Spain (a country that imports around 100% of the crude and petroleum that it needs) consumes more than 62 million tons of petroleum each year (nearly 450 million barrels), fuel amounts which provide 47.3% of the nation's energy needs. Europe's decision will increase the price of oil by 20%. "In the upcoming weeks and days, the market is going to wait nervously for Iran's next move, and in the unlikely case that an armed conflict erupts, the price of oil will potentially skyrocket no less than $20-40 dollars per barrel due to restrained free passage through the Strait of Hormuz," Saxo Bank basic materials analyst Ole S. Hansen reported on the EU's decision to impose an embargo on Iranian crude imports.