The fifth decree law to cut fuel excise duties could soon arrive on the Government’s tables. To finance the discounts, the mechanism of mobile excise duties will be reactivated: however, with the extra revenue from June, it can offer little more than symbolic help, and will therefore need to be strengthened with alternative coverage. While waiting for the more substantial VAT, collected in July, to come into play in August.
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The acceleration
After days of hesitation, the continuous rise in prices and the insistent pressure from the opposition are pushing the Government to accelerate. Yesterday, as leaked from Palazzo Chigi, Prime Minister Giorgia Meloni and Economy Minister Giancarlo Giorgetti had a long phone conversation from which the need to intervene as soon as possible emerged. On the agenda, the last council of ministers before the summer break is set for August 4: but given the emergency, an earlier intervention is not unlikely.
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The prices
The political need to send a signal to Italians on the eve of the holiday month weighs heavily, while diesel has for days broken the symbolic threshold of two euros per liter and is approaching the historical highs of March 2022. According to the Ministry of Enterprises’ monitoring, yesterday it reached 2.161 euros per liter, which is 27.7 cents above early-month levels and only 7 cents from the absolute peak of March 15 four years ago. Gasoline also increased, but more moderately, reaching 1.968 euros per liter (+16.2 cents since the beginning of the month). The different trend of the two fuels could lead to a differentiated cut: also because the coverage is still to be defined. A generalized discount of around 20-25 cents would cost about 140 million per week. Not a small amount for a public budget that continues to be stretched to the maximum and, as previous examples show, pushes to concentrate efforts more on the most expensive fuel.
LAB24 / Updated prices for gasoline and diesel
Bleak prospects
But it’s not just the increases recorded so far that worry the Government. Oil companies themselves predict further increases in the coming days, when recent Brent dynamics will impact prices. Yesterday, the barrel fell to 96.4 dollars, after breaking the 100 dollar threshold on Thursday, which it had abandoned at the end of May. But the prospects are not rosy.
The Strait of Hormuz remains closed, and Houthi incursions around Bab al-Mandeb in the Red Sea are a concern. But critical junctures are multiplying across the entire hydrocarbon logistics chain, putting approximately 25% of global trade at risk.
This also contributes to the urgency felt at the highest levels of the Executive, which therefore cannot wait for the activation times of the EU safeguard clause on energy investments. This can only become operational in autumn, much later than the start of the process with Giorgetti’s communications to the Chambers on August 5; and which, in any case, cannot be used for fuel discounts.
In the ongoing multiple crisis that presents uncertainties regarding supplies, a tax cut translates into an incentive for the consumption of a good that becomes scarce. But if the shortage of fuels is inflating prices, the push for consumption risks further fueling the race, in turn intensifying requests for aid. In a vicious circle that is complicated to break: but often the reasons of politics do not coincide with those of economics.
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