Bloomberg News

Italians Get Sticker Shock at the Pump

March 30, 2012

Austerity measures introduced by Prime Minister Mario Monti’s government have pushed Italian gas prices to the highest in Europe, an average of 1.82 euros per liter. Photographer: Alessandra Benedetti/Bloomberg

Austerity measures introduced by Prime Minister Mario Monti’s government have pushed Italian gas prices to the highest in Europe, an average of 1.82 euros per liter. Photographer: Alessandra Benedetti/Bloomberg

Enrico Cioni, a 36-year-old high school teacher who lives near Venice, bought himself a red Alfa Romeo MiTo in 2010, figuring the sporty little hatchback would be fun to drive and save on gas. Instead, as Italy raised gas taxes 24 percent over the past year, his fuel spending soared to 200 euros ($267) a month.

“I don’t have any alternative during the week, as I have to drive to reach the two schools where I teach”, Cioni said by phone while driving from a high school in Valdobbiadene, home to the Prosecco sparkling wine. “But I’ve cut the use of my MiTo during weekends to save money.”

Austerity measures introduced by Prime Minister Mario Monti’s government have pushed Italian gas prices to the highest in Europe, an average of 1.82 euros per liter, or $9.17 per gallon, with taxes accounting for about 54 percent of the total, Bloomberg Businessweek reports in its April 2 issue.

It’s a profound shock for this country of car lovers, home of supercar makers Ferrari SpA and Lamborghini SpA, where the rate of vehicle ownership is among the highest in the world, and one that’s producing even more economic pain, as Italians curtail travel and shun new-car purchases.

After the latest gas-tax hike in December, auto sales fell 18 percent during January and February, and are expected to drop to their lowest level since 1985 this year to about 1.6 million vehicles, in a fifth consecutive yearly decline from 2.5 million cars in 2007.

Hitting Bottom

“We are hitting the bottom; it can’t be worse than this,” Fiat SpA (F) Chief Executive Sergio Marchionne said at the Geneva International Motor Show this month.

Fiat expects further sales decline in March because of a strike by truck drivers, who blocked deliveries across the country for more than one month, as they protested the increase of fuel prices. Fiat has to shut down some of its plants in recent weeks because of the strikes.

Promotor, an automotive research group based in Bologna, estimates that gasoline and diesel consumption fell 9.6 percent in Italy during the first two months of this year.

“We’re seeing a decline in revenue of about 10 percent to 15 percent as people are not using their cars as much as before,” said Biagio Zagaria, who works at a gas station in central Milan.

Travel Drops

Carlo Pileri, head of consumer association ADOC, predicted that 7 in 10 Italians won’t travel during the Easter vacation “mainly because of higher fuel prices and the cost of services.”

Toll-road traffic in Italy fell 8 percent in the first two months of 2012 because of the surge in gas prices, which discouraged Italians from using their cars, along with bad weather and the recession, Fabio Cerchiai, chairman of Atlantia Spa, Italy’s biggest toll-road operator, said in an interview in Cernobbio, Italy, today. Traffic in March fell 4 percent to 5 percent, he said.

The Italians hit hardest by higher gas taxes are those like teacher Cioni -- working people who live in areas poorly served by public transportation.

“Wealthy drivers don’t feel the pain, they keep on driving their luxury cars,” said Gian Primo Quagliano, Promotor’s president.

The rich have not escaped unscathed, though. The government has raised taxes on high-end cars, and tax inspectors have stepped up scrutiny of people who own expensive vehicles to determine whether they are accurately reporting their income.

Tax Revenues

One risk for the government is that Italians will curb their driving so much that gas-tax revenues will fall. It hasn’t happened yet; Promotor said that despite the decrease in consumption during January and February, total spending on gas and diesel was up 11 percent to 10.1 billion euros.

But many Italians are clearly angry.

“The increasing gasoline price upset me and the people I know so much that I drive less -- not because I can’t afford it, but in a sign of protest,” said Ippolito Alfieri, founder of a Milan advertising agency who drives a Volvo XC90.

In the northern town of Reggio Emilia, a farmers’ group held a protest on March 24 in which it offered rides on donkeys as a tax-free means of transportation. Consumer Group Adiconsum has started a petition on its website asking the government to cut levies on fuel.

A few Italians, though, have managed to escape the higher fuel prices. Ivo, a 39-year-old from northern Italy who declined to give his last name, said he now buys gas for his Renault sedan from a black-market dealer who doesn’t pay taxes.

“Gas prices are too high, so I found a way to pay less taxes and keep on driving,” he said.

To contact the reporters on this story: Tommaso Ebhardt in Milan at tebhardt@bloomberg.net

To contact the reporter on this story: Carol Matlack in Paris at cmatlack@bloomberg.net


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