Energy, Industry, and Services in Spain: An Economic Analysis
Energy Production and Consumption in Spain
Insufficient Energy Production
Energy sources are essential in developed societies. There is a relationship between economic development and energy consumption. Spain has insufficient energy production and has to import four-fifths of its energy. We import oil and, especially, natural gas. In addition, energy production in Spain is becoming stagnant, and the total represents less than we consume. The production of oil and natural gas is decreasing, as is that of coal, because their exploitation is uneconomical. The production of hydroelectric and nuclear energy is stagnant.
Energy Distribution
Energy is distributed from the places where it occurs through various channels. The power supply, the high-voltage electrical network in Spain, is managed by the Spanish Red Electrica Company, which is responsible for network infrastructure, connecting plants to distribution points to consumers and also with connections to other countries. Spain imports electricity from France and Portugal and exports to Andorra and Morocco.
Natural gas is distributed through pipelines from Morocco, a pipeline that passes under the Strait of Gibraltar, carrying the gas coming from Algeria for the entire peninsula. Natural Gas handles the distribution.
Oil is distributed through various pipelines. The main concentration ports are eight refineries, where it is processed into gasoline, diesel fuel, lubricants, and tar. Several companies are engaged in importing, producing, and distributing petroleum products, such as CEPSA and REPSOL.
Growing Energy Consumption
Energy consumption has increased as economic development has augmented. Between 1995 and 2007, energy consumption in Spain doubled. This increase causes a large expenditure on imports, as well as major environmental and political problems due to the dependency we have on the countries that supply us with energy sources.
From 1990 to now, energy consumption patterns have been changing. Industrial consumption has declined because its importance in the economy has decreased. In contrast, energy consumption in transport and for various other uses, especially domestic consumption, has increased.
The problems posed by the augmentation of consumption have made the state take steps to plan for power consumption. This is done through National Energy Plans (PEN), which seek to:
- Reduce oil imports.
- Augment natural gas consumption.
- Reinforce the production of hydropower.
- Increase the production of renewable energies. In 2004, only 6.5% of all energy was produced from renewable sources; the goal is to reach 12% by 2010.
- Reduce the emission of polluting gases, especially CO2, since Spain is one of the countries that signed the Kyoto Protocol.
The Tertiary Sector in Spain
Infrastructure of the Tertiary Sector
The tertiary sector involves many different activities, including transport, trade, finance, education, health, and tourism. The tertiary sector is most important in Catalonia, Madrid, the Balearic Islands, Valencia, and Andalusia. Causes include:
- Early industrialization.
- High implantation of the administration (Madrid).
- Presence of big companies (Madrid, Barcelona).
- Tourism.
The most developed transport in Spain is the road network, which reaches everywhere and transports the most goods and passengers. However, it creates problems of congestion and traffic in metropolitan areas and contributes significantly to pollution. The roads are most heavily loaded on the Mediterranean coast, the Cantabrian coast, and around Madrid. It is also very important throughout the Ebro Valley.
The second largest transport system in Spain is the railroad. 90% of the rail network is part of ADIF (Railway Infrastructure Manager) and is operated by RENFE, both arising from the old RENFE. Apart from RENFE, there are FEVE (depending on the U.S. government, meaning narrow-gauge railways operating in the Cantabrian) and FGC (Ferrocarriles de la Generalitat of Catalonia). The future of Spain’s railways is to improve commuter services in major cities and enhance a network of high-speed trains that will connect major cities and link with the European high-speed network.
Shipping is very important in foreign trade, especially in long-distance transport. Two ports stand out: Valencia and Barcelona.
Air transport has had great development in recent years, especially for passengers because of low-cost airlines. Major airports include Madrid, Barcelona, and Palma de Mallorca.
Commercial Services and Finance
Internal commerce has developed strongly in the most populated and well-connected areas. The main commercial areas of the state are located around Madrid, Barcelona, Valencia, Seville, and Alicante.
The Spanish financial sector has experienced a very important transformation in recent decades due to the globalization of the economy and the introduction of the euro. This has led to company mergers to improve competitiveness. Important financial companies include the Santander Central Hispano Group and the Bilbao Biscay Argentaria Group. Important savings banks also constitute financial institutions, such as the Savings Bank of Barcelona and Pensions, the Savings Bank of Catalonia, and the Savings Bank of Piety and Mount of Madrid.
Tourism Sector and its Impact
Tourism is one of the bases of the Spanish economy. It generates many jobs and provides a significant amount of foreign currency used to pay part of the trade deficit. Spain is the second-largest tourist destination in the world, after France. The most popular tourist communities are the Balearic Islands, Catalonia, Andalusia, and the Canary Islands. Most of this tourism is foreign (two-thirds), and although beach tourism is predominant, other types of tourism, such as rural tourism, have also developed.
However, tourism also presents problems:
- Economic: Some areas, like the Canary Islands, the Balearic Islands, and some Mediterranean areas, depend heavily on tourism. If tourism were to enter a crisis, these areas would face serious economic problems.
- Excessive seasonality: During the summer, certain areas become overpopulated, while in winter, they are virtually empty. This means that services are underused, and there are also a few temporary workers.
- Environmental impact: Large tracts of natural areas have been affected, especially on the coast, but also in the mountains. This causes problems with the supply of water and food, purification of water, collection and treatment of waste, saturation of roads, and pollution (water, soil, and acoustic).
Primary Sector: Agriculture, Livestock, Fishing, and Forestry
Industrialization of the Primary Sector
Since the twentieth century, the primary sector has exhibited some key features:
- A decrease in dryland farming and an increase in irrigation.
- An increase in the area covered by forests. Pastureland has decreased, allowing forests to recover.
- A loss of agricultural land due to an increase in urban land for infrastructure and services.
- An increase in the importance of livestock. Fisheries and forestry have declined.
- A strong relationship between the agricultural and livestock sectors and the food industry.
Agriculture
Due to the dry weather, almost 80% of agriculture is dryland, and irrigation accounts for 21%. However, the production of irrigated land is much higher, accounting for two-thirds of the total. Rainfed crops include cereals, olives, vineyards, and some fruits. Irrigated crops include market garden produce (lettuce, beans, tomatoes), fruit trees (especially citrus fruits, apples, pears), and some industrial crops such as maize, sunflower, and alfalfa.
Most farms are family-owned, although there are also large companies and cooperatives. Generally, the number of farms is decreasing, and their size is increasing due to technological advancements. Larger farms are found in the interior, mostly dominated by dryland wheat, while the smallest occur in the periphery where irrigation is abundant.
Livestock
Industrial or market-oriented livestock farming is predominant, highly mechanized, and with high concentrations of animals. The most important sector is pig farming. Cattle and poultry are also important, as are sheep and goats. All livestock is closely related to the meat, milk, and egg industries.
Fishing
Fishing has little economic importance and has declined in recent years. The number of ships has decreased, but their features have improved. It is closely related to the canning industry.
Forestry
Forest area occupies a little more than half of the territory, and a little less than half is forested. It is of little importance, and its main products are wood and cork.
The primary sector is increasingly linked to the food industry, which is one of the most important due to its economic value and the population it employs (over 14%). The most prominent sectors are meat, dairy, bread, pastries, wines, and canned vegetables.
Industrial Production and Construction
Spain entered the EU in 1986, forcing companies to look outward, both in terms of imports and exports. Entry into the EU represented entry into a more globalized world where the national market was losing ground, and the European and world markets were gaining importance.
In Spain, SMEs are very important, many of which are subcontractors for large companies or highly specialized. On the other hand, the volume of production and economic power is increasingly concentrated in large companies and multinationals.
The main industrial areas are concentrated in two main areas: the Mediterranean (Gerona-Malaga) and the Ebro axis (Basque Country to Lerida), apart from the metropolitan region of Madrid. The most important industrial region is Catalonia, followed distantly by Madrid, Valencia, Andalusia, and the Basque Country.
The most important sectors are: food, drinks, tobacco, chemicals (with an emphasis on pharmaceuticals), transport, machinery, and non-metallic minerals.
Construction
The construction sector generates many jobs and is one of the main causes of the current economic crisis. It depends on long economic cycles and generally consists of many small and large companies. It relies heavily on public works.
Regional Contrasts and Finances
Regional Contrasts
In terms of GDP, the Spanish economy is the fifth largest in the EU and the eleventh largest in the world. However, not all areas of the state have the same level of development or the same income per capita. The communities with the highest incomes are Navarra, the Basque Country, Madrid, and Catalonia. The lowest are Extremadura, Andalusia, and Castilla-La Mancha.
Finances of the Autonomous Communities
According to the constitution, there are two models for financing autonomous communities: the common system and the statutory regime. Most communities are governed by the common regime. According to this regime, communities have two types of resources (money):
- Tax revenues: These come from certain taxes that have been transferred to the autonomous communities.
- Non-tax revenues: These are paid by the central state for services provided to citizens.
Communities can also receive funds from the EU and can apply for loans.