Nova workboard

a blog from young economists at Nova SBE

Italian citizens are stuck in the gasoline puzzle

Since early 70’ Italian citizens have been suffering from one of the highest gasoline cost of the entire world and, after the powerful earthquake that hit the central region of the country one month ago, a new rise in the excise taxes on oil is considered almost sure by many opinion makers.

Compared with Germany and France, the major European economies, Italian gasoline’s cost for consumers is 10.7% greater: 1.31€/l for both German and French people versus 1.45€/l for Italians (data from http://www.GlobalPetrolPrices.com are referred to the 20th June-26th September 2016 period on a weekly basis). Such a high level in oil price is due to a fierce taxation system, mainly on the excise side. Nowadays, the Italian excise duty for leaded petrol product accounts for 0,7284€ per liter according to EY “2016 Global oil and gas tax guide”. Throughout Italian history, governments have used the excise on oil to collect money, easily and rapidly, in order to cope with exceptional circumstances or natural calamities or wars, too. For instance, taxpayers are still paying excise for the Ethiopia campaign of 1935.

On one hand, oil producers, who bear legally the excise, face no troubles in shifting the tax burden to gasoline users. On the other side, Italian consumers can hardly subtract themselves from this huge excise incidence. In fact, oil is Italy’s most important energy source (according to http://www.statista.com).

A possible explanation on this inelastic demand may rely on the inefficient infrastructures and transportation systems. Looking at OECD 2015 data, Italian investments in inland infrastructure, a key determinant of performance in the transport sector which include both spending on new transport construction and the improvement of the existing network, is only 0,40% of the GDP. This data is consistently low comparing to the 1% on the total GDP spent in a country as France, and to the German expenditure over GDP, which is around 0,60% (source: http://www.data.oecd.org).

Thus, when a new excise is introduced, consumers who use gasoline to reach their work place by car, could barely change their behaviour and start using an alternative mean of transport, like train, bus or metro. Perhaps those citizens who reside in metropolitan city, namely Milan and Rome, will start going to work with bicycle if there would be cozy and safe cycle paths developed as in Netherlands. Again, the main concern for Italians is a lack of substitution effect which could break up this stuck situation.

Focusing the attention on a long-term perspective, Italy 2015 investment level in renewables has been 33% less than German level (source: http://www.data.oecd.org) and the trend is steepening in the last three years. Nonetheless Italian investments in renewable sector is, quite surprisingly, the second one regarding the European Union, slightly higher than Sweden. So if Italian governments will do the necessary investments in both infrastructures and renewables, the next generations might be able to quit from the gasoline puzzle and, who knows, maybe excise duties on petrol will be used in a better way: as incentive to choose the “green way” in spite of polluted one, no more to raise money quickly.

 

Andrea Zilio

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Author: studentnovasbe

Master student in Nova Sbe

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