Phoenix 24
Temporary relief is buying time while global oil risks continue to rise.
Rome
Italy’s government has extended its fuel tax relief package until May 1 as higher oil prices and continuing instability in the Middle East keep pressure on households, transport companies and businesses. Economy Minister Giancarlo Giorgetti said the new decree will cost approximately €500 million, prolonging measures that were originally due to expire on April 7.
The central provision maintains a reduction of 25 euro cents per liter on gasoline and diesel, while liquefied petroleum gas receives a 12 cent discount. The initial phase of the measure cost approximately €528 million. The government is also extending targeted support to productive sectors exposed to high fuel costs, including tax credits for transport operators, fishermen and agricultural businesses.
Financing the extension requires a combination of additional tax revenue and unused emissions related resources. Giorgetti said around €200 million would come from higher value added tax receipts, while another €300 million would be redirected from previously unused ETS carbon related funds. The government says it intends to avoid resources already allocated to energy intensive industries.
The intervention comes at a difficult moment for Italy’s fiscal strategy. Rome had been moving toward reducing its deficit below 3 percent of GDP, an objective that could help the country exit the European Union’s excessive deficit procedure. Giorgetti has warned, however, that if the Middle East conflict continues to generate exceptional energy costs, greater flexibility in European fiscal rules may become unavoidable.
Fuel prices illustrate the pressure. Average gasoline prices were recently around €1.73 per liter, while diesel stood near €2.03. Compared with levels before the latest escalation involving Iran, diesel has risen much more sharply than gasoline. In several Italian regions, self service diesel prices have already exceeded €2.10 per liter.
Consumer groups argue that the extension does not go far enough. Codacons says market increases have already absorbed much of the benefit created by the tax reduction, particularly for diesel users. The organization had called not only for an extension but for a larger fiscal discount capable of producing a more visible decline at filling stations.
The policy therefore highlights a broader dilemma. Governments can temporarily reduce taxes to cushion energy shocks, but sustained increases in global crude prices can rapidly neutralize those interventions.
Italy’s extension offers immediate relief, but its effectiveness will ultimately depend less on domestic taxation than on whether geopolitical pressures affecting global oil supply begin to ease.
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