Italians Squeezed by $9.50-a-Gallon Gas Face Costly Drive

Giovanni Cimmino filled up his Fiat Multipla in Croatia before returning to Italy after his summer holiday, avoiding Europe’s highest gasoline 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 fuel has climbed to more than 2 euros ($2.50) a liter, about $9.50 a gallon, 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 gasoline 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 SpA (F) and highway operator Atlantia SpA. (ATL)

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-liter (16 gallon) tank costs about 120 euros compared with the 111 euros an average Italian household spends per week on food, according to Coldiretti.

Photographer: Alessia Pierdomenico/Bloomberg

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

Motorway traffic declined 8 percent in the first half, according to Atlantia, the... Read More

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Photographer: Alessia Pierdomenico/Bloomberg

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

‘Blackmail’

“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 jewelry maker, who lives in the Tuscan countryside. “I don’t have an alternative.”

Italian drivers paid an average 1.87 euros a liter including tax for unleaded gasoline at the end of August, 19 percent more than a year ago, according to Bloomberg data. Gasoline and diesel pump prices rose to record levels throughout Europe last week, with retail gas prices averaging 1.70 euros a liter in the European Union’s 27 member nations, exceeding the earlier peak of 1.69 euros 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 percent 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.

Demand Declines

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

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

Gas stations owned by Eni SpA (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 liter.

“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.”

Tax Increase

Gasoline prices begin to jump shortly after Monti came to power in November. He quickly passed a 20 billion-euro austerity plan that included an increase in fuel levies that added about 10 cents to a liter. Rising crude prices -- North Sea Brent, the benchmark for over half the world’s oil, has rallied more than 25 percent since its 2012 low in June -- coupled with a 4.5 percent 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 U.S. Fiat will halt production at its newest plant in the country at Pomigliano, near Naples, for two weeks starting Sept. 24 because of weak demand, a union official said Aug. 29.

Monti is under growing pressure to cut fuel levies. France this week announced a plan to reduce retail prices of gasoline 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.”

To contact the reporters on this story: Chiara Vasarri in Rome at cvasarri@bloomberg.net; Tommaso Ebhardt in Milan at tebhardt@bloomberg.net

To contact the editors responsible for this story: Jerrold Colten at jcolten@bloomberg.net; Chad Thomas at cthomas16@bloomberg.net

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