Fossil fuel prices and inflation in Italy

The high share of gas in imported natural the first half of 2022 is a result of the severe drought which has affected Italy gas since the beginning of the year and resulted in a 40% drop in hydropower production, which reached a 50-year low (JRC, 2022). [...] Retail electricity prices in relatively stable Italy have fluctuated in the range between €0.20 per kWh and €0.25 per kWh in the last over the 10 years to 2021, slightly higher than in France, the UK and Poland, decade but lower than in Germany as shown in Figure 4. [...] Cambridge Econometrics 8 Fossil fuel prices and inflation in Italy Throughout Europe, natural gas prices play a role in wholesale electricity price formation (Zakeri et al, 2022) but, in Italy, the importance of gas prices in driving wholesale are likely to play a greater role than in other markets, given the much higher share of natural gas in electricity production than in peer countries such as. [...] We estimate current electricity generation costs in are estimated to Italy across technologies to be in the region of €260 per MWh, based on Italy’s be at least twice electricity mix in the five months to May 2022 and data on the levelized cost of as high as electricity from IRENA and the World Bank, factoring in the recent high gas production costs and carbon prices. [...] Retail energy prices are a component of the consumer prices index of the recent (CPI) and their weights account for around 10% of the overall basket of goods consumer price and services included in the Italian CPI.