Italy: High petrol prices

Isn't it great that the high fuel prices are happening somewhere else!

$3.13-a-litre petrol puts squeeze on Italians

Stuff,

4 September, 2012

Giovanni Cimmino filled up his Fiat Multipla in Croatia before returning to Italy after his summer holiday, avoiding Europe's highest fuel prices.

"You need a smart strategy to save on gas," said Cimmino, 37, who manages a metals trading company near Milan. With pump prices at a record in Italy, "I tend to use more public transportation and avoid driving when it's not necessary."

Unleaded petrol has climbed to more than €2 (NZ$3.13) a litre in some areas of Italy, including parts of the Tuscany region. That's made this year's end-of-summer "rientro," when Italians return to the cities after their August vacations, more costly than usual.

Motorists are being hit by the fallout from the European debt crisis as the government of Prime Minister Mario Monti raises fuel taxes to rein in the world's fourth-biggest public debt. High fuel prices are weighing on consumer spending, deepening the country's fourth recession since 2001 and sapping earnings at carmaker Fiat and highway operator Atlantia.

Italians now spend more each week to fill their tanks than they do to feed their families, according to agricultural trade group Coldiretti. Topping up a car's 60-litre tank costs about €120 (NZ$187) compared with the €111 (NZ$173) an average Italian household spends per week on food, according to Coldiretti.

"It's blackmail for people like me who don't live in a big city and can't take public transport," said Costanza Cappelli, a 32-year-old consultant to a jewellery maker, who lives in the Tuscan countryside. "I don't have an alternative."

Italian drivers paid an average €1.87 (NZ$2.92) a litre including tax for unleaded petrol at the end of August, 19 per cent more than a year ago, according to Bloomberg data. Petrol and diesel pump prices rose to record levels throughout Europe last week, with retail gas prices averaging €1.70 (NZ$2.66) a litre in the European Union's 27 member nations, exceeding the earlier peak of €1.69 (NZ$2.64) in April, according to data from the European Commission.

Italians, among the world's most avid drivers based on car-ownership rates, have been shunning purchases of new vehicles. Car sales plummeted 20 per cent through July and purchases from private customers may slump this year to the lowest since 1955, Romano Valente, general manager of auto industry group Unrae, said in an interview last month.

Promotor, an automotive research group based in Bologna, estimates that petrol and diesel consumption fell 9.7 per cent in the country during the first six months of this year.

Motorway traffic declined 8 per cent in the first half, according to Atlantia, the country's biggest toll-road operator, while Autogrill, the world's biggest manager of airport and highway restaurants, reported a 10.4 per cent drop in food and beverage sales in Italy over the same period.

Gas stations owned by Eni, Italy's largest energy producer, have had lines 10 cars long this summer as the company offers weekend discounts of about 20 cents a litre.

"A weak euro, the rising price of oil and higher taxes are an explosive mix for prices at the pump," Eni Chief Executive Officer Paolo Scaroni told reporters last week in the Adriatic coast resort of Rimini. "Our discounts are helping Italians, but if this situation continues, prices will continue to rise."

Fuel prices begin to jump shortly after Monti came to power in November. He quickly passed a €20 billion austerity plan that included an increase in fuel levies that added about 10 cents to a litre. Rising crude prices — North Sea Brent, the benchmark for over half the world's oil, has rallied more than 25 per cent since its 2012 low in June — coupled with a 4.5 per cent decline in the euro this year have contributed to the peak in Italian gasoline prices coinciding with the top driving season.

Concerns that the economic slump will deepen have led Fiat to temporarily stop new investments in Italy. CEO Sergio Marchionne has vowed to close a second Italian factory, after shuttering one last year, unless he finds a way to export cars to the United States Fiat will halt production at its newest plant in the country at Pomigliano, near Naples, for two weeks starting September 24 because of weak demand, a union official said August 29.

Monti is under growing pressure to cut fuel levies. France this week announced a plan to reduce retail prices of petrol and diesel that will cost the government €300 million euros in lost taxes. Politicians backing the Italian government have called on Monti to follow France's lead. Industry Ministry Undersecretary Claudio De Vincenti told Radio Anch'io in an interview yesterday that the Italian government is working on a plan to reduce fuel taxes.

"If fuel prices remain so high, we could face an inflationary depression," said Emiliano Brancaccio, professor of political economy at the University of Sannio in Benevento. "Levies like these risk having the worst impact on economic growth as they hit all types of income indiscriminately."

Footnote: Comparing recent petrol prices worldwide, Americans are paying around NZ$1.23 a litre, while in Norway it is whopping NZ$3.32. Kiwis are paying around $2.19.