March 5, 2011

Spain Looks To Offset Oil Hike

Spain announced new plans Friday to mandate energy-saving measures that will help the country deal with the spike in oil prices due to the turbulence in the Middle East.

The planned measures, which include lowering speed limits to reduce fuel consumption, will reduce oil imports by five percent, saving the country 3.2 billion dollars annually, based on current prices, the industry ministry said in a statement after the plan was approved.

The new mandated speed limit for highways will be 110 kph (68 mph), instead of the current 120 kph (74 mph) limit. The reduced speed limit will take effect Monday and will remain in place until June 30. It may be extended if needed.

"Sometimes you have to adopt measures, even if they are unpopular. With the price of a liter of gasoline at its highest in history, we have to save because what is at stake is the economic recovery," Deputy Prime Minister Alfredo Perez Rubalcaba told a news conference.

The ministry said it will also cut prices on commuter and medium-haul trains, use more low-consumption light bulbs on its streets, and subsidize energy-efficient tires.

The ministry said it will subsidize the purchase of 240,000 tires designed to cut down on fuel consumption, which will benefit at least 60,000 vehicles.

The measures also include increasing the amount of bio-fuel which oil companies are required to include in all diesel and gasoline to 7 percent from the current 5.8 percent.

Seventy-five percent of Spain's energy consumption is imported, compared to an average of 60 percent for the entire European Union. According to the Spanish government, each increase of 10 euros in the cost of a barrel of oil adds six billion euros ($8.4 billion) to the country's annual oil bill.

While Spain survived the economic recession, pulling out of it in the first quarter of 2010, its growth rate fell flat throughout the rest of the year. The government predicts the economy will expand by 1.3 percent this year, after contracting 0.1 percent in 2010. It expects it will pick up to 2.5 percent by next year.

But the country's fragile economic recovery could be threatened if world oil prices continue to skyrocket, causing a possible rise in borrowing costs in the European Central Bank.


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