Concern in the supply chain over methane price rises

 In Fuels, NEWS & INTERVIEWS, Sustainable Mobility, Technical innovation

Federmetano is worried that the market situation may cause difficulties in a sector offering enormous opportunities for decarbonisation. The Independent Italian Federation of Service Stations defends operators and denounces international speculation

The recent increase in the price of compressed natural gas (CNG) is cause for concern among service area managers and operators in the natural gas supply chain. In some parts of Italy, CNG prices have even reached €2/kg. The situation could well pose a risk for a segment – vehicles running on methane – which in recent years, thanks to lower refuelling costs and lower polluting emissions, has seen growth from 2019 to 2020 (the year of the pandemic) from 1.071 million vehicles to 1.088 million.

Trade associations Federmetano, representing distributors and transporters, and the Independent Italian Federation of Service Station Operators (Faib), representing operating companies, issued press releases expressing their concern over the market situation.

Federmetano, on 1 October, confirmed that “We have worked, and will continue to do our utmost, to support the sector”. More specifically, in relation to the “Bill Saving” decree published in the Official Gazette last 27 September, the association opened a dialogue with the Ministry of Economy and Finance requesting that the reduced 5% VAT rate envisaged in the new law should also be applied to automotive use, with the possibility passing in the benefit to end users. “Since it takes 60 days for the decree to be converted into law, Federmetano is continuing its battle in this regard and also considering further action,” the press release commented. Federmetano has also asked the methane cylinder fund management committee to postpone/reduce the envisaged contribution charges on the agenda to ensure further help for users.

Lastly, Federmetano also mentioned its action as regards the price issue at parliamentary level. This what the President of the association, Dante Natali, had to say: “While waiting for the resources and measures promised in the NRP to ensure more biomethane effectively becomes available on the market, Federmetano will do everything in its power to support sector operators in response to the current emergency and to continue to ensure users reasonable prices for this vital fuel in terms of achieving sustainability. Nor should we forget that this escalation in prices of gas raw material creates serious difficulties for a sector of excellence that offers enormous decarbonisation potential for Italy and Europe.”

As Natali pointed out, almost 1,500 CNG service stations are fully operative in Italy. This infrastructure serves 2.1% of the fleet in circulation, in other words vehicles that already run by 20% on biomethane that in turn represent a bridge towards the distribution and use of hydrogen. Natali emphasised in the press release that “this market trend affects not only compressed natural gas but also liquefied gas. In fact, the price of LNG, with its spot market characteristics, was the first to suffer the repercussions of this increase, said Natali. “We believe that the LNG market, in the same way that is was quick to acknowledge increases, will be just as quick in adapting to decreases in the price of raw materials as soon as they occur. In any case, we do not see further structural elements that can prolong the current critical situation. The persistence of this anomaly would have very negative consequences on ecological developments in the transport sector. This sector in recent years has been in the forefront of a full-scale revolution,” Natali explained. He mentioned that from the opening of the first LNG point of sale in 2014 to date, more than one hundred distributors now operate in the area, plus another 31 points of sale in design or construction stages. Natali also pointed out that again since 2014 to date, more than 3,600 heavy vehicles have been registered as running on LNG, which achieve a reduction of particulate matter (PM10, PM2.5), a decrease in local pollutants (nitrogen oxides and sulphur oxides) and a 20% reduction in carbon dioxide emissions. Natali highlights that these vehicles will increasingly be able to be run on BioLng as its availability expands.

The President of the Independent Italian Federation of Service Station Operators (Faib), Giuseppe Sperduto, pointed out that “the increase in methane prices must be placed in the context of international speculation and is certainly not attributable to our operators who indeed were themselves hit by this sudden increase”. In a press release issued on 4 October, Sperduto noted that service station managers, as is well known, apply the prices recommended by the suppliers and just like consumers they also lose out through such increases, since their income depends on the amounts supplied in litres”. He added: “the higher prices become, the less you sell and the less you earn”. The President of Faib also recalled that “service station managers on average earn three cents per litre, whatever the cost”.

Yet Sperduto feels that problem lies elsewhere: Less petrol and less diesel are being sold because of the advent of hybrid cars, vehicles with low consumption or intelligent consumption, integrated mobility and electric cars. This situation has consequences on the organization of international supply chains and markets. Alongside this consideration, it must also be borne in mind that the recovery in consumption and internal mobility is not connected with poorly synchronised reaction in the logistics field; on the other hand, tensions on international gas markets and expectations of complications over supplies from Russia may have triggered speculation. There is no doubt that anyone who invested in a methane-powered car, in the certainty of saving money thanks to this fuel, today feel betrayed and are quite rightly protesting about the situation.”

Faib has asked the government “to clarify matters, activate supervisory bodies and open a parliamentary inquiry into trend in prices for energy products as winter draws near and in the light of statements by many experts who foresee a return of price rises starting from next spring, i.e. in five months’ time at the end of the winter, as some statements by Minister Cingolani seem to confirm.” The Independent Italian Federation of Service Station Operators feels that the prospect of a rise in prices “is tremendous and of great concern to motorists, ordinary people, businesses and the economic recovery that may well be badly affected by this new overhead that will then spread to other areas.” Faib concluded: “today, more than ever before, energy choices must be varied and rely on technological neutrality for the future”.