We’ve got plenty of gas, but it’s too expensive

Whilst general attention is entirely focused on the price of oil, which rises and falls in line with the agreements reached and subsequently called into question between the US and Iran, gas prices are seeing a fresh surge that does not bode well for Italians’ bills. Yesterday, the IGI (Italian Gas Index) stood at 63.44 euros per megawatt-hour, a significant rise from the previous day’s figure of 58.77 euros. In just over a month, the index – which is calculated daily by the Energy Markets Operator (GME) and serves as a benchmark for industry operators – has risen by almost 20 per cent and is 50 per cent higher than it was a year ago. The Italian energy paradox therefore continues, driven by factors linked to storage levels and growing international competition over LNG (liquefied natural gas), which is pushing up wholesale prices on the energy markets. Yet Italian storage levels are above the European average (76 per cent compared with 57 per cent).

Analysts explain that having more gas in storage is an advantage at times of energy shortages, but this does not mean one is immune to market shocks, as the wholesale price remains linked to factors such as the closure of the Strait of Hormuz, reduced imports from Russia, competition from Asia and maintenance work at certain fields in Norway. Furthermore, in Italy there are two structural problems. The first is that gas accounts for 50 per cent of national electricity generation (a figure significantly higher than in France and Spain, for example), and the second is that energy production from renewable sources is still too low to meet demand. In short, Italy is the country in Europe that pays the highest price for electricity and is the most exposed to shocks caused by geopolitical changes, because it is overly dependent on a gas market over which it has no control and is failing to complete the energy transition. This imbalance is clearly reflected in people’s bills.