ECB: Oil prices might cause slowdown in Eurozone

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ECB: Oil prices might cause slowdown in Eurozone

The Spain Herald
July 15, 2005

The European Central Bank (ECB) reported on Thursday that economic growth in the Eurozone might slow down for several reasons, the most important the price of oil (see next article). According to the best current information, growth during the second quarter of 2005 will be half a percentage point less than during the first quarter. The Community Statistical Office (Eurostat) said that second-quarter GDP growth in both the Eurozone and the European Union as a whole was 0.5%, down from 1.0% in the first quarter. According to the ECB, "The increase in already high petroleum prices seems to have had an effect on consumer demand and confidence, as current data show that second-quarter growth will be inferior to first-quarter." However, Eurostat said, "The data we have are still contradictory, and some of the latest indicators show a slight improvement, though there are no signs of a sustained recovery." Regarding the Eurozone's exports, the ECB said, "They should be favored by the current growth of world demand and the Eurozone's increased competitiveness in terms of price." ECB chief economist Otmar Issing, said that interest rates in the Eurozone are correct and historically low. The current 2% rate does not impede economic growth, said Issing. He added that the economy's evolution shows a positive trend and that economic signs allow mild optimism, after the important decline of foreseen economic growth in June.


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Fuel prices in Spain hit record high

The Spain Herald
July 7, 2005

Fuel prices in Spain have risen again and reached historic levels, according to information collected by the industry ministry from fuel stations. Diesel fuel A costs €0.93 a liter, while its new, more ecological version is at €0.97. Both prices are approximately 15% above their level at the beginning of 2005. Gasoline has also experienced sharp price increases. The most used type, 95-octane unleaded, costs €0.98 a liter, 98-octane unleaded costs €1.08, and leaded 97-octane is at €1.06; all these prices are about 17% above their level in January. These peaks reflect a price rise other countries are also seeing, caused partly by the euro's depreciation against the dollar and partly by the high price of crude oil and its derivatives. Álvaro Mazarrasa, director of the industry's trade association, warned on Tuesday that current levels of crude oil prices will stay about the same over the next few months, at around $55-60 a barrel. Mazarrasa said that prices reflect fears of supply problems, adding that "there is severe tension" in the demand for petroleum products. However, he said those fears are unfounded, though the balance between supply and demand "is very equal."


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