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Page added on August 31, 2012

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

Consumption

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.

“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.”

Slumping Car Sales

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. 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.

Toll Roads

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.”

North Sea Brent, the benchmark for over half the world’s oil, has rallied more than 25 percent since its 2012 low in June.

Fiat Plants

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.

“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.”

Bloomberg



5 Comments on "Italians Squeezed by $9.50-a-Gallon Gas Face Costly Drive Home"

  1. Arthur on Fri, 31st Aug 2012 8:20 am 

    Last year I kissed my beloved alfa romeo sportscar goodbye and reduced fuel cost to one third of the original cost by buying a second hand german car, which is one of the most fuel efficient cars ever built (80 mpg), after my wife assured me she would not leave me because of it.lol. This car gives me a big advantage over the majority of my fellow Dutchmen, who still think/hope that at some point prices will come down again and they can continue to shine in their beamers. But this is not going to happen, but instead the majority 25 mpg crowd will start to economize on car usage, starting a wave of demand destruction, keeping a lid on prices, so I can continu driving for a few more years, making money in the proces until finally the music stops for me as well.

  2. DC on Fri, 31st Aug 2012 9:17 am 

    The biggest problem I think people refuse to face, or even articulate, is the global ‘economy’ is currently built largely around promoting and servicing car-ownership. That has to change. That economy is dying, but sheer inertia will keep it going long past its expiry date. The car economy has to end, and quickly, but no replacement economy for it is on the horizon, and well be largely stuck with a world of poorly built, now, use-less infrastructure, built solely for cars, and now good only for salvage. And even that will be hard. Care to walk 15 miles to help pull down a wall-mart? Didnt think so….

    At least Old Europe, so were often told, has some of the old infrastructure and building styles that might enable to weather a permanent decline. Maybe that is over-stated, its hard to say. But here in N.A., I look around at the towns and cities I live in, and I constantly wonder what the people would do if there cars were no longer available? The answer, is …..nothing, or very little. No cars, and 90% of N.A. cities and towns shrivel and die, or have to be rebuilt in record time, an unlikely prospect given what I see around me.

    Its good Fiat wont be ‘growing’, yes its bad for jobs for people there, but that cant be helped. Throwing money and resources into the car-economy is actually regressive now. Best not delay the death of the global death industry known as ‘car’ manufacturers any longer.

  3. Kenz300 on Fri, 31st Aug 2012 10:17 am 

    We have built a society and infrastructure around the automobile and trucks for delivery of goods. As the price of oil continues to increase we will all be looking for ways to save money on transportation costs. Walking and riding a bicycle was more common in many places years ago. Trolleys once ran thru the center of cities. As a society we need to invest more in safe walking and bicycle lanes along with more public mass transit. If we are to reduce our use of the automobile we will need to improve the availability and convenience of other options.

  4. BillT on Fri, 31st Aug 2012 11:20 am 

    Arthur, I can relate, I owned an Alfa long ago and loved it. That was a real car.

    Any young person involved in a career that does not provide necessities…will be out of a job in 10-20 years. There will be plenty of abandoned buildings scattered around the world to live in for free.

  5. Arthur on Fri, 31st Aug 2012 1:42 pm 

    Bill, that is true. In Holland house owners are complaining that the real estate market is somehow mysteriously ‘locked’ and nobody is buying. In reality the would-be sellers have yet to accept that in reality houses are overpriced by at least 30% and that the good old days where house=ATM are over for good. Peter Schiff is right with his advice to rent, not own. I would add: only own if you have a piece of land attached to the house, otherwise sell. Indeed in a decade or so you can live for free in the greatest misallocation of capital in history: suburbia. You can already live for free in rundown areas in Detroit.

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