Meloni-Giorgetti meeting: Government set to introduce a new fuel decree

The fifth decree-law to cut fuel excise duties could soon be on the government’s agenda. To fund the reductions, the ‘floating excise duty’ mechanism will be reactivated; however, given June’s windfall revenue, this is likely to offer little more than symbolic relief and will therefore need to be bolstered by alternative sources of funding. This is pending the introduction in August of the more substantial VAT revenue collected in July.

After days of hesitation, the continued rise in prices and persistent pressure from the opposition are forcing the Government to step up its efforts. Yesterday, as leaked from Palazzo Chigi, Prime Minister Giorgia Meloni and Economy Minister Giancarlo Giorgetti held a lengthy telephone discussion, which highlighted the need to take action as soon as possible. The agenda includes the final Cabinet meeting before the summer recess, scheduled for 4 August; however, given the urgency of the situation, it is not unlikely that action will be taken sooner.

The political need to send a message to Italians on the eve of the holiday season is a key factor, whilst diesel prices have been above the symbolic threshold of two euros per litre for several days and are approaching the all-time highs recorded in March 2022. According to the Ministry of Enterprise’s monitoring, yesterday it reached 2.161 euros per litre, which is 27.7 cents above the levels at the start of the month and just 7 cents shy of the all-time high recorded on 15 March four years ago. Petrol prices are also rising, albeit more moderately, having reached 1.968 euros per litre (+16.2 cents since the start of the month). The differing trends in the two fuels could lead to a differentiated price cut – not least because the funding arrangements have yet to be finalised. A generalised discount of around 20–25 cents would cost approximately 140 million per week. This is no small sum for a public budget that continues to be stretched to the limit and, as past experience shows, is leading to a greater focus on the more expensive fuel.

LAB24 / The latest petrol and diesel prices

But it is not just the rises seen so far that are causing the Government concern. The oil companies themselves are forecasting further increases in the coming days, when recent movements in Brent prices will be reflected in retail prices. Yesterday, the price per barrel fell to $96.4, having broken through the $100 mark on Thursday – a level last seen at the end of May. But the outlook is not promising.
The Strait of Hormuz remains closed, and there are concerns over Houthi incursions around Bab al-Mandeb in the Red Sea. But critical bottlenecks are multiplying across the entire hydrocarbon supply chain, putting around 25 per cent of global trade at risk.
This, too, explains the sense of urgency felt at the highest levels of the government, which therefore cannot wait for the EU’s safeguard clause on energy investments to come into effect. This clause will only become operational in the autumn – well after the process began with Giorgetti’s address to Parliament on 5 August – and, in any case, cannot be used for fuel price reductions.
In the current multi-faceted crisis, which raises uncertainties regarding supplies, a tax cut amounts to an incentive to consume a commodity that is becoming scarce. But if it is a shortage of fuel that is driving up prices, the boost to consumption risks fuelling the race even further, which in turn intensifies calls for aid. It is a vicious circle that is difficult to break: yet political considerations often do not align with economic ones.