At a time when other foods, including grains, and vegetable oil prices such as those for soyabean oil, have been under pressure from excess production and inventories over the past few years, olive oil has become one of the top performing food commodities in the first half of 2015. The benchmark Spanish olive oil price, which fell to a 10-year low in 2012, has hit a nine-year high of €3.5 a kg.
Output in Spain, by far the largest producer, more than halved due to the exceptionally dry and hot weather, while Italy's olive groves suffered from excessive rains as well as a fruit fly infestation. As a result, global production for the 2014-15 crop year is projected to fall 27 per cent to 2.4m tonnes from the previous year, according to the International Olive Council.
There are continuing concerns that the dry and hot weather in Spain may hit this year's production as well, says Loraine Hudson, analyst at Mintec.
The sharp falls in olive oil supplies have deepened Italy's olive oil trade deficit. The country, which is the world's second-largest exporter and largest consumer of the product, has historically been a net importer of olive oil, buying the commodity from other producers in the Mediterranean region for domestic consumption and exports.
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The olive oil, labelled as "packaged in Italy", is widely sold to areas including northern Europe and the US.
However, the bad harvest has sent Italy's virgin olive oil deficit to its highest since 2008, according to data from the International Trade Centre in Switzerland, as imports have increased sharply.
The large premium of Italian high-end olive oil compared with that of other origins will mean an increase in blending, say analysts.
"There isn't enough extra virgin olive oil in Italy. The Italians will import what is available," says Rabobank's Mr Martielli.
Meanwhile, food experts warn that the rise in prices provides further incentive for olive oil fraud.
Along with fish and organic foods, olive oil is one of the food products most prone to fraud, according to Maree Gallagher, a Dublin and Brussels based lawyer specialising in food. "When prices are high and supplies reduced, there is more incentive for fraud and for criminals to get involved," she says.
One of the issues is the lack of stringent regulation surrounding food fraud in Europe. She adds: "If you don't have deterrents in place, you're leaving yourselves open to fraud."
Italy's central inspectorate for agricultural food fraud (ICQRF) dealt with 72 criminal olive oil cases last year, up from 50 in 2013, while the number of asset seizures almost doubled from 52 to 95.
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Successful interventions by the ICQRF last year included seizing poor quality olive oil at leading Italian ports as well as the arrest of members of a criminal gang importing products labelled "100 per cent Italian organic extra virgin olive oil" from Spain.
Stefano Vaccari, head of the ICQRF, warns that while high prices increases the risk of consumers being offered "fake" olive oil, products purporting to be Italian have always been around due to the high prices that the country's quality food produce can command. "Unfortunately, we are the victims of our own success," he says.
He adds that Italian enforcement bodies are committed to quashing any possible criminal involvement in olive oil, and that the ICQRF has signed agreements with eBay, Alibaba and other ecommerce companies to crack down on fraudulent olive oil sales.