Oil prices rose dramatically in 2022. That is not just the widely tracked barrel of crude. The cost of olive oil, a rather more niche commodity, has also spiked. That is the pits for Islington households looking for something to drizzle on their endive — and a worrying sign of things to come.
The price rise has been sharp. Last December, extra virgin oil — the most expensive kind, made from cold-pressed olives — touched €5.5 per litre in Italy. That is up 50 per cent compared to the previous year, and is about double the price in 2020. Other olive oils have increased even more.
Olive oil is a staple in producing countries — nonna’s pasta sauce is swimming in the stuff. And the growing popularity of the Mediterranean diet has increased olive oil consumption globally: it is up twofold since 1990.
But the spike is not driven by liberal use of oil. It is the supply that has withered. Juicy olives are the product of temperate weather and some rainfall. A scorching summer in Italy and Spain — the two biggest producers — has caused European production to fall 34 per cent, according to estimates by the European Commission.
The price increase is going to bite. That is not so much of an issue for consumers in the UK and US, where olive oil is still a niche — and elite — product. Per capita consumption is only 1 litre a year there. However, Spaniards, Italians and Greeks guzzle 10 litres a head. By this reckoning, a family of four that likes extra virgin olive oil might spend some €220 a year. They now have a good incentive to switch to cheaper oils, if only for cooking.
Companies that sell olive oil may be squeezed too, as they struggle to pass on the price increase to consumers. CVC-controlled Deoleo, the leading olive oil producer globally with brands including Carapelli and Bertolli, emerged from a debt restructuring in 2020. Its ebit margin is set to fall to 3.15 per cent of revenues in 2023, according to S&P Capital IQ estimates, down from 5.4 per cent in 2021.
Olive harvests have good years and bad years. But the fear is that sizzling Mediterranean summers might become more frequent as climate change advances. That would add pricier olive oil to the list of consequences — and spell bad news for the salad days of Islington.