As oil prices surge in the wake of the Iran conflict, European governments are scrambling to shield consumers from the pain at the pump. Italy is no exception, but the measures Rome has chosen reveal a familiar pattern: complex intervention layered on top of complex intervention, with uncertain results for the people it’s meant to help.
Carlo Stagnaro, Research Director at Istituto Bruno Leoni, joined the ConsEUmer podcast to walk us through what Italy is doing, why it may fall short, and what a genuinely pro-consumer energy policy might look like instead.
What Italy Is Doing
The Italian government’s response has two main prongs. First, it cut excise taxes on diesel and gasoline by roughly 20 euro cents per liter, a measure that could be enacted quickly without external approval. Second, it introduced a more complex mechanism to reduce electricity prices by subsidizing gas-fired power plants, which generate around 40% of Italy’s electricity, with the goal of lowering wholesale power costs across the grid. That second measure is still awaiting clearance from the EU Commission, as it may affect cross-border electricity trade.
Alongside these interventions, the government has mandated that any benefit must be fully passed through to consumers, and has imposed an extensive monitoring regime on energy retailers. Electricity suppliers, all 600-plus of them, must report their profit margins by product type and customer category, so regulators can verify that subsidies aren’t simply padding company bottom lines.
Why the Oversight May Not Work
It sounds thorough. In practice, Stagnaro argues, it’s unlikely to achieve what it promises.
The core problem is that prices aren’t simply a stack of costs that regulators can audit line by line. They emerge from the dynamic interaction of supply and demand. Mandating pass-through and scrutinizing retail margins doesn’t account for what happens further up the value chain, where producers or intermediaries may quietly absorb the subsidy before it ever reaches the consumer.
There’s also a practical absurdity in asking suppliers to report profits by individual offer type. Whether a fixed-price contract turns out to be profitable for the supplier depends on where wholesale prices end up, something no one knows in advance. That price certainty is part of what consumers are paying for. Requiring granular profit reporting on inherently forward-looking products doesn’t generate meaningful accountability; it generates paperwork.
The same logic applies to windfall profit taxes, the mirror image of subsidies. Europe has tried those too, often with explicit bans on passing the cost to consumers. The economic literature is clear: those bans rarely hold. Markets find a way.
The Real Fix: More Competition
If the goal is to ensure consumers benefit from lower costs, the most reliable mechanism isn’t surveillance, it’s competition. When suppliers genuinely compete for customers, they have every incentive to pass savings along. The problem is that Italy’s regulatory environment has been quietly suppressing competition for years.
One telling example: until recently, opening a new petrol station in Italy was relatively straightforward. A new regulation now requires any new station to offer not just petrol and diesel, but also methane, hydrogen, or electric charging. The result? Higher startup costs, stricter safety requirements, more space needed, and far fewer new stations opening. Local monopoly power grows quietly as a result.
A permanent reduction in excise taxes, rather than a temporary one, would send clearer price signals. Removing the barriers to opening new fuel retail outlets would introduce the competitive pressure that actually guarantees savings reach consumers. Allowing gas station bundling with supermarkets or large retailers could make entry economically viable in more markets.
The Bigger Picture: Energy Security
Beyond the immediate price crisis, Italy faces a structural vulnerability. The country consumes around 60 billion cubic meters of natural gas per year, but produces only about 3 billion, roughly 5% of its own demand. In the 1990s, domestic production was 20 billion cubic meters. Industry insiders believe output could realistically be doubled from current levels with relatively modest effort.
That won’t solve Italy’s energy dependence overnight, but it matters. Combined with diplomatic efforts to diversify supply, through Libya, Algeria, and the United States, now the EU’s largest LNG supplier, incremental domestic production buys resilience. As Stagnaro put it: as long as Italy consumes natural gas, meeting part of that demand domestically is “a no-brainer.”
The Iran crisis will eventually pass. But the underlying choices about competition, regulation, and domestic production will shape Italian consumers’ energy bills for years to come.
*This article is based on a Consumer Choice Center podcast interview with Carlo Stagnaro, Research Director at Istituto Bruno Leoni. You can find more of his work at brunoleone.it and epicenternetwork.eu