Italian oil companies are voluntarily reducing fuel prices

The high fuel prices are also a concern for Italian politicians. But instead of a state price cap, the government is sticking with an appeal to the petroleum industry. They are now partly voluntarily lowering prices. This should be cheaper for companies than state coercion.

Italy's largest fuel suppliers have reduced their prices for petrol and diesel, some significantly, and promised no or only limited increases in the coming weeks. This means that the companies are voluntarily foregoing income that could potentially amount to several hundred million euros. The partially state-owned oil company Eni announced at the weekend that it would reduce the end customer price for a liter of premium gasoline to 1.99 euros and that for diesel to 2.19 euros. Previously, prices were around 17 cents higher. Eni is the largest fuel seller in Italy with around 3,900 gas stations.

Eni announced that the price cap should initially apply until the end of October. An extension beyond that until the end of the year is possible. Shortly afterwards, the country's second largest gas station operator, Italia Petroli, also announced its own voluntary fuel price cap, which would gradually be implemented at the group's approximately 3,500 gas stations. Most recently, Q8, the subsidiary of the Kuwaiti oil company KPC, also announced that it would join the price reduction. The three companies together control about half of the Italian gas station market.

In view of the sharp rise in fuel prices, the Italian government has already reduced or temporarily suspended taxes several times in recent months. However, the latest discount on diesel sales taxes expires in October. The government coalition has so far refrained from imposing a price cap and an excess profits tax in order to use the petroleum industry to finance the relief measures. Instead, Prime Minister Georgia Meloni appealed to companies to voluntarily lower their prices.

The voluntary price cap could incur high costs for companies, depending on how fuel prices develop in the coming weeks and months. If market prices remain at the current level, so that Eni forgoes around 17 cents per liter, the partially state-owned company alone will lose revenue of around 100 million euros per month, as Italian media report.

Nevertheless, the sacrifice could pay off. On the stock exchange, Eni shares rose around three percent after the price cap was announced on Monday. On the one hand, Eni has recently increased its profits significantly thanks to high prices and, according to analysts, can afford the step. On the other hand, the company can hope to use the voluntary measure to prevent significantly more expensive government interventions such as a statutory price cap or an excess profits tax. “It is cheaper for Eni to introduce a voluntary maximum price,” the “Handelsblatt” quotes energy expert Simone Tagliapietra from the European think tank Bruegel. "And it's easier for the government to say thank you for that than to impose an excess profits tax."