Sunday, June 1, 2008

Europe balks at $8 a gallon gas

Trucks blocking a main London highway, fishermen blockading French ports, Dutch drivers petitioning parliament, Spanish and Italian fishermen voting to strike – Europeans are becoming restless at relentlessly high energy costs.

But what can governments do about oil prices that are six times what they were six years ago? Protesters, experts, and officials disagree substantially on which is the most appropriate course of action.

• Tax relief. European drivers pay the highest gas taxes in the world. In Britain, tax accounts for around 65 percent of the pump price for diesel, which recently topped 130 pence a liter or $9.88 per gallon.

"Within a matter of weeks we could see a large number of British haulage companies go bankrupt," warns Peter Carroll, a truck-business owner whose fuel bill has jumped almost 50 percent since October. "There should be a rebate for essential users. It already applies to bus companies. It would cost money in the short term, but it will keep alive an industry."

Chancellor Alistair Darling has promised to review a fuel tax hike planned for October. But that might be too little too late. "It isn't going to make a great deal of difference," says Jonathan Loynes, an economist. "It's only 2 pence, which pales in significance compared with the rises we have seen."

French president Nicolas Sarkozy has called for European Union (EU) cuts in fuel sales taxes to help consumers, noting that as fuel prices have shot up, so has the tax take. But the EU objects. It argues this would drain public coffers and merely benefit oil producers.

"The European Commission considers this to be extremely dangerous, because it sends a very negative message to producing countries to say they can raise prices because we will counteract that with [lower] taxes," says Ferran Tarradellas, a spokesman for EU energy commissioner Andris Piebalgs.

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