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Olive oil, often referred to as liquid gold, has played an important role in the evolution of human civilisation for thousands of years. Valued for its rich flavour and numerous health benefits, olive oil is not merely a food but also a symbol of millennial heritage and traditions. Its origins can be traced back to the ancient Mediterranean, where it is believed that the olive tree, Olea europaea, was first cultivated more than 6,000 years ago.
The Minoans, one of the earliest civilisations in Europe, cultivated olive trees on the island of Crete. They used the resulting oil for cooking, lighting lamps, and as a base for perfumes and ointments. In ancient Greece, olive oil became a symbol of wealth, health, and fertility. The olive tree itself was considered sacred, particularly in Athens, where the goddess Athena was believed to have bestowed the city with its first olive tree. Olive oil was also awarded as a prize to the winners of sporting competitions, such as the ancient Olympics.
The Egyptians used olive oil in religious rituals and for mummification, as it was a key component in the sacred oils used in temple rituals and was often associated with the gods. The Romans further enhanced the olive oil trade and spread its cultivation, establishing olive groves throughout their empire, from Spain to North Africa, making olive oil a widely used commodity across Europe.
Through a combination of historical, cultural, and economic factors, olive oil eventually gained worldwide popularity.
The Phoenicians, Greeks, and Romans traded olive oil extensively throughout the Mediterranean and beyond, reaching as far as Northern Europe and the Middle East. During the Renaissance, Italy and Spain became significant producers and exporters of olive oil. The Age of Exploration and subsequent colonisation of the Americas introduced olive oil to the New World. Although initially limited to regions with a climate similar to that of the Mediterranean, such as California, Chile, or Argentina, the production and consumption of olive oil gradually increased across the American continent.
Ancient Greeks harvesting olives for oil, by H.M. Herge © Natural Geographic Image Collection
During the 20th century, olive oil gained global recognition as a key component of the Mediterranean diet, heavily promoted for its health benefits. Scientific studies highlighting its positive effects on cardiac health and longevity have contributed to its popularity. Concurrently, globalisation has made various foods more accessible worldwide, leading to olive oil becoming a staple in kitchens around the world, even in countries where it was previously unknown. Due to its versatility, the global demand for high-quality, extra virgin olive oil has surged, and it is now produced in many countries outside the Mediterranean, including the United States, Australia, and South Africa.
Ripe olives awaiting harvest © Wikicommons/Nickfraser
Olive oil is generally considered healthier than many other oils, particularly due to its composition and the health benefits associated with its use. It is rich in monounsaturated fats, particularly oleic acid, which can constitute up to 80 percent of its total fat content. These monounsaturated fats are known to reduce inflammation, lower ‘bad’ LDL cholesterol levels, and increase ‘good’ HDL cholesterol, thereby contributing to a lower risk of heart disease. There is a high concentration of antioxidants and polyphenols, particularly in extra-virgin olive oil (EVOO), which have proven anti-inflammatory properties. Meanwhile, olive oil helps protect the body against oxidative stress, which is linked to some chronic diseases, including heart disease, cancer, and neurodegenerative conditions. Olive oil also contains oleocanthal, which has anti-inflammatory effects similar to ibuprofen. While extra-virgin olive oil has a lower smoke point, refined olive oils have a higher one, making them suitable for high-temperature cooking and less likely to produce harmful compounds when heated.
Other types of oil, such as soybean, corn, and even sunflower oil, are high in omega-6 polyunsaturated fats, which, when consumed in excess, can promote inflammation. Coconut and palm oil are high in saturated fats, which can raise LDL cholesterol levels and increase the risk of heart disease.
The Mediterranean diet, which features olive oil as its main fat source, has been linked to increased longevity and a reduced risk of chronic diseases. The ‘Blue Zones’ diet, inspired by the Mediterranean lifestyle and associated with exceptional lifespans, has gained significant popularity. Olive oil offers a well-balanced fat profile, with a beneficial ratio of omega-6 to omega-3 fatty acids that supports a healthy inflammatory response. Among oils with diverse nutritional compositions and applications, olive oil—especially extra virgin olive oil—stands out as exceptionally healthy and beneficial, earning it the title ‘king of oils’.
Virgin olive oils are classified into three distinct categories. Extra virgin olive oil is regarded as the highest quality, with no organoleptic defects and an acidity level not exceeding 0.8 per cent. Virgin olive oil may exhibit some sensory defects and has a maximum acidity of 2 per cent. Lampante olive oil is of inferior quality, with an acidity level greater than 2 per cent and lacking any fruity characteristics. It is typically refined or used for general industrial purposes. The world’s largest olive oil producers are primarily Mediterranean countries, where the climate and terrain are optimal for olive cultivation. Spain is the global leader, responsible for approximately 40-50 per cent of worldwide production. The Andalusia region in southern Spain serves as the epicentre of the country’s olive oil industry. Additionally, Spain is the largest exporter of olive oil, with a substantial portion of its production being exported beyond the EU, particularly to the United States and other markets.
Olive groves in Andalusia, Spain © Nrf
Italy is the world’s second-largest producer, accounting for around 20 per cent of global olive oil output. Regions such as Puglia, Tuscany, and Sicily are celebrated for their high-quality olive oils. Greece ranks third, with olive oil being an integral part of its culture and cuisine. Notably, Greece has the highest per capita consumption of olive oil worldwide, at 12 kg per person per year.
Türkiye is also a significant producer, with fluctuating output primarily from the Aegean region. It consistently ranks among the top five producers globally, although it is not widely renowned for its olive oil. Tunisia is Africa’s largest olive oil producer, while Morocco has been steadily increasing its production in recent years, investing heavily in modernising its oil industry.
Portugal is another important European producer, with its olive oil often praised for its distinctive flavour. The Alentejo region is a major hub for Portuguese olive oil production.
The European Union (EU) is the dominant region for global olive oil production, accounting for over 70 per cent of the world’s total output. Approximately 4 million hectares of land in the EU are dedicated to olive tree cultivation, encompassing both traditional and super-intensive groves.
The EU is also the leading consumer and exporter of olive oil. Italy and Spain are the largest consumers within the EU, each with an annual consumption of around 500,000 tonnes. The EU accounts for approximately 53 per cent of global consumption and 65 per cent of global exports (Source: EU). The primary destinations for European olive oil exports are the United States, Brazil, and Japan.
The EU has implemented stringent regulations governing olive oil production and labelling, ensuring high standards and protecting regional denominations. This has contributed to the sustained reputation of European olive oils on the global market.
The cost of producing one litre of olive oil varies depending on the geographical region, agricultural techniques, and processing methodologies employed. Cultivation costs, including land, labour, water, and agricultural inputs, range from €0.50 to €2.50 per kilogram of olives. Harvesting is labour-intensive, but mechanised techniques can reduce costs, unlike manual picking in small, traditional groves, which is more expensive. Converting olives into oil typically costs between €0.50 and €1 per litre.
Producing high-quality extra virgin olive oil requires a more meticulous process, which increases associated costs. In addition to production costs, bottling, labelling, and packaging expenses must be considered, ranging considerably from €0.50 to €1 per litre. Furthermore, costs related to shipping, marketing, and sales may add an additional €2-3 to the overall cost. Therefore, the average total cost to produce one litre of standard extra virgin olive oil in Europe may range from €3 to €6.
Profit margins in the olive oil industry can vary widely, depending on the scale of production, oil quality, market conditions, and geographical location. For premium extra virgin olive oil, profits can be relatively high, sometimes reaching 25 to 40 per cent. These producers often focus on small-scale, high-quality production with a distinctive brand identity, allowing them to command higher prices.
Producers of organic olive oil, which typically sells at much higher prices, may achieve higher margins compared to conventional producers. In some cases, organic olive oil can be sold for a staggering €1,000 or more per bottle.
Large-scale producers, particularly those in Spain, tend to have lower profit margins. However, they benefit from economies of scale while also facing significant competition and price volatility. Given the average retail prices in Europe, ranging from €7 to €10 per litre, profit margins can vary widely. The profitability of the olive oil industry is highly sensitive to external factors, including poor harvests due to droughts or other climatic issues, which can reduce supply and drive up prices.
Olive blossom © Wikicommons
The olive oil industry comprises both family-owned small farms and large-scale commercial enterprises, reflecting its deep historical roots and modern economic realities. In some Mediterranean countries, olive oil production is deeply embedded in familial traditions, often passed down through generations. These family-owned farms typically operate on a small scale, producing high-quality olive oil in limited quantities, primarily for local consumption.
Particularly in Greece and Italy, a significant number of producers are small farmers who tend groves that have been in their families for centuries. These producers often prioritise quality over quantity and engage in artisanal production methods. Their goal is to preserve the distinctive flavours and qualities of their olive oils, which are marketed as premium or boutique products.
Conversely, countries such as Spain and Italy also host significant large-scale commercial olive oil production. These businesses manage expansive olive groves and employ industrial harvesting and processing techniques. Spain, in particular, is home to many large-scale enterprises with a substantial presence in global markets. These companies benefit from economies of scale, enabling them to produce olive oil at lower costs and in greater volumes. They are often involved in all stages of the supply chain, from cultivation to bottling and marketing. With substantial financial resources, they can invest in technology, research, and marketing, allowing them to compete globally.
In addition to small family farms and large commercial operations, cooperatives play a pivotal role in the olive oil industry, particularly in countries like Spain, Italy, and Greece. Cooperatives enable small farmers to pool their resources, share processing facilities, and collectively market their products. This helps small producers remain competitive in a market increasingly dominated by larger entities.
By mid-2024, the average price of olive oil in Europe had increased significantly, primarily driven by a confluence of factors, with extreme weather conditions impacting production in major olive oil-producing countries. The price of extra virgin olive oil was currently between €9 and €12 per litre, marking a significant increase of approximately 50 per cent compared to the previous year (Source: The Independent). This surge was largely attributed to climatic challenges, including droughts and heatwaves, which had resulted in a substantial reduction in olive harvests across the Mediterranean region.
To bloom in spring, olive trees require exposure to temperatures of approximately 5 to 15°C during the colder months of the year. However, recent years have seen warmer winters across Europe, which now pose a significant threat to the production of olives and olive oil.
The price increase for olive oil has had a significant impact on various stakeholders across the supply chain, from producers to consumers. Consumers have been particularly affected. Following a 50 to 100 per cent price increase in some regions, olive oil, a dietary staple in many Mediterranean countries, has become prohibitively expensive. For instance, in Spain, the cost of essential olive oil products has risen substantially. The elevated prices have led to a reduction in olive oil consumption among many households. Spain witnessed a notable decline in retail purchases, with some reports indicating a decrease of up to 41 per cent in sales of extra virgin olive oil, as consumers opt for cheaper alternatives such as sunflower or other vegetable oils.
In regions where olive oil is a dietary cornerstone, the shift away from this healthy fat due to rising costs could lead to a decline in the overall nutritional quality of diets. Concurrently, price fluctuations have had a particularly adverse impact on small-scale farmers and family-run olive oil producers. Although higher prices theoretically result in greater revenues, these gains are often offset by increased production costs. The financial pressure has made it challenging for some small farmers to maintain their operations, potentially leading to industry consolidation where only larger, more resilient producers can survive.
However, large-scale commercial producers have also encountered difficulties. While they may be better equipped to absorb cost increases, the reduced demand for olive oil due to higher prices can negatively impact their sales volumes, affecting overall profitability.
Countries that rely heavily on olive oil exports, such as Spain and Italy, may face difficulties in maintaining their market share amidst potential challenges. The elevated prices make their products less competitive globally, which may lead to a reduction in export volumes and an impact on the global trade balance. The entire olive oil supply chain, from cultivation to retail, is experiencing challenges due to increased costs and reduced demand. Consequently, the market has seen disruptions, with some retailers reporting stock shortages and price fluctuations.
In regions where olive oil production is a significant economic activity, the price increases can have broader economic implications, considerably impacting the local population. In response to public outcry, some European governments have taken steps such as lowering or even eliminating VAT on olive oil to mitigate the impact on consumers. For instance, Spain has temporarily eliminated the 5 per cent VAT on this essential ingredient.
Those with lower incomes, particularly in Mediterranean countries where olive oil is a dietary staple, are among the most affected by the current situation. The elevated cost of olive oil adds to the overall financial burden, leading to changes in consumption patterns. Small and family-run farms face the dual pressure of rising production costs and market uncertainty, making it challenging to maintain their businesses in a highly competitive and price-sensitive market. Retailers, particularly those selling high-end or artisanal olive oils, have seen a decline in sales volumes as consumers opt for more economical alternatives and reduce or even eliminate their olive oil consumption.
Members of the International Olive Council (IOC) during the 119th Plenary Session at IOC Headquarters, Madrid, June 2024 © IOC
Globally, and particularly in Europe, several bodies are dedicated to monitoring and supporting the olive oil industry, addressing both large producers and small-scale artisans. The European Union, in particular, exercises careful monitoring, regulation, and protection of the olive oil industry, recognising its importance. Meanwhile, the International Olive Council (IOC), an intergovernmental organisation based in Madrid with 16 member states plus the European Union, plays a crucial role in promoting olive oil worldwide. The IOC tracks production, defines quality standards, and monitors authenticity.
To safeguard this significant sector for the EU, several measures have been implemented. For instance, between 2019 and 2020, the EU introduced an aid scheme for the private storage of olive oil, adopted in November 2019. This scheme encompassed a total volume of 213,500 tonnes of olive oil, representing approximately 27 per cent of the total EU stocks. Other aid schemes frequently provide olive oil farmers and producers with access to low-interest loans or fiscal facilities.
This year, the European Union has implemented a series of measures aimed at alleviating the adverse effects of recent olive oil price increases. These price rises have been attributed to a combination of factors, including unfavourable weather conditions and poor harvests in major production regions across the continent. The EU and national governments are developing strategies to support farmers affected by the crisis, including exploring improved water management practices and genetic research to enhance the resilience of olive trees to climate change. The goal is to stabilise future production and prices.
These efforts are focused on ensuring that the market remains as stable and strong as possible despite ongoing climatic challenges and future expected hardships. However, prices are expected to remain high, at least for a while.
To further shield the population from the impact of high olive oil prices, the EU and European governments could consider additional measures. Establishing strategic reserves of olive oil could help stabilise prices during times of scarcity. Although potentially affecting its own producers in the long run, the EU could encourage imports and increase trade agreements with non-traditional producers outside the EU, at least for limited periods, to stabilise supply in the event of poor harvests on the European continent.
© Nrf
Meanwhile, expanding EU-wide climate adaptation programmes specifically for agriculture, including funding for research on crop resilience and climate mitigation strategies, could address the root causes of the present price increases. Additionally, strengthening regulations against speculative trading in agricultural commodities could help prevent price manipulation and ensure that prices reflect actual market conditions rather than financial speculation.
As Europe navigates the complexities of modern agriculture combined with the consequences of climate change, olive oil remains not just a culinary staple, but a symbol of the region’s deep agricultural heritage. The olive oil industry today supports millions of European families, particularly in the southern part of the continent, and is essential to the cultural identity of countries such as Spain, Italy, and Greece. For consumers, olive oil is more than just a cooking ingredient; it is a link to the Mediterranean diet and tradition.
The recent increase in olive oil prices underscores the vulnerabilities of this economic sector in the face of climatic conditions and various economic pressures. Therefore, robust strategies are needed to protect both the industry and the consumers who rely on it. A sustainable and innovative approach to agriculture can safeguard the legacy of this ‘liquid gold’ for future generations.
alexandra.paucescu@europe-diplomatic.eu
Alexandra Paucescu
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