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Fuel-Price Protests Spread Across Europe

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Fuel-Price Protests Spread Across Europe

Fishermen, Truckers 
Lead Calls for Officials 
To Cut Excise Taxes
May 22, 2008

European protests against soaring fuel prices spread across the continent Wednesday, as fishermen, truckers and other groups called for government action as crude-oil prices hit yet another high.

The protests are creating conflicts for European policymakers, who have used every tool available to governments — taxes, congestion charges, public-transport incentives and even bicycle rentals — to reduce their countries’ reliance on cars and trucks to cut fuel consumption and protect the environment. It’s unlikely that a few protests will reverse that unified goal, although temporary rescue plans are expected.

France’s politically powerful fishing unions want the government to increase a $480 million rescue plan aimed at offsetting a doubling in the cost of diesel fuel since November. The fishing fleet also has been blockading French ports and oil terminals on the Atlantic and the Mediterranean coasts for more than a week.

A clash in Paris between around 200 protesting fishermen and police Wednesday came as Brent crude oil futures for July delivery, the benchmark contract for Europe, jumped more than $1 to hit an all-time high of $129.70, driven by robust demand and reluctance among oil producers to increase output.

European governments are under pressure to cut excise taxes on fuel to provide relief. Rising oil and gas prices already pose an inflation conundrum for central banks and impose higher costs for businesses and commuters that could put economic growth at risk. Now fuel prices risk triggering strikes and roadblocks that could wreak havoc in Europe’s largely fragmented transport industry.

Hefty sales, environmental and excise taxes on fuel mean prices are already far higher in Europe than they are in the U.S. A gallon of unleaded gasoline costs around $9.00 a gallon in most of Europe, more than double the nearly $4.00 currently paid by U.S. drivers.

Governments have so far been reluctant to cut these taxes, seeking instead to shift the blame on oil producers.

Germany’s lobby group for car drivers, the ADAC, wants to see cuts in the “eco tax,” used to help finance the state pension program. “The threshold of pain has been reached for car drivers,” said Otto Saalmann, a spokesman for ADAC.

But some analysts say lower fuel taxes would only magnify demand.

“A one-off cut in excise taxes could even worsen the situation in the all-too-likely case of oil prices rising further,” said Enrico D’Elia, a senior economist at Italian think-tank ISAE. Excise taxes are levied on volume, not price, and so actually dampen price volatility, he noted.

Italy’s new industry minister, Claudio Scajola, called the price Italians pay for fuel “intolerable.” He met with oil-industry leaders last Friday and warned he might take “structural measures” if the companies didn’t bring their prices more in line with the rest of Europe.

People who don’t own cars are also hit by rising fuel prices as businesses try to pass the higher costs they incur on to their consumers.

“We’re already talking about raising prices, because at current fuel price levels we can’t operate,” Roman Smidbersky, head of sales at the Czech Republic’s largest trucking and logistics operator, CS Cargo AS, told a local newspaper Wednesday. He estimated that logistics companies will have to lift their rates by as much as 10% just to keep their trucks on the road.

In Bulgaria, around 1,000 truckers besieged roads leading into Sofia earlier this week to protest the rise in diesel prices. They are particularly incensed that the price of diesel is now above that of regular gasoline, and note excise taxes on diesel have been hiked fourfold in only a few years. Those tax hikes were largely designed to comply with European Union rules and eliminate previous subsidy schemes.

Up to a thousand British truckers coordinated by protest group TransAction 2007 plan to drive their rigs into London next Tuesday, snarling traffic as they deliver demands for relief on fuel taxes to Prime Minister Gordon Brown’s Downing Street residence. The action marks an escalation from a protest last month, when 65 trucks blocked traffic in some of London busiest thoroughfares.

U.K. haulers claim rising oil prices now mean that fuel represents over 40% of their total operating costs, up from 30% just six months ago. “The haulage industry is on its knees, it’s unable to recover all these price increases,” said Mike Presneill, a haulage contractor from Kent, England, who will take part in the protest.

Write to Andrea Thomas at [email protected]

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