Europeans find petrol prices taxing

Published September 5, 2005

PARIS: As they grapple with soaring petrol prices in France, Serge Poitevieau, a cafe owner, and Frederique Usher, an unemployed but well-heeled young woman, have dramatically different perspectives and radically different solutions.

Poitevieau, 53, has stopped using his Spanish-made Seat automobile except to make weekend visits to his parents. He said he now gets around mostly on foot. As for France’s notoriously high petrol tax, “I say bravo,” he said, leaning across the bar. “I think they should raise it more to discourage the traffic.”

Usher, who declined to give her age but appeared to be in her late 20s, said the French government should abolish the petrol tax, which now accounts for more than 70 per cent of the pump price — about $6.77 a gallon for regular unleaded in Paris.

“I’m going to change cars,” Usher said as her golf-cart-sized Smart Car was being delivered by a parking lot attendant. “I’m getting the new Lexus hybrid.”

Young or old, working class or upper crust, Europeans are being pummelled by skyrocketing gasoline and oil prices, which are up more than 10 per cent over last year’s prices and are expected to continue climbing as a result of the blow Hurricane Katrina delivered to the US oil industry this week.

But after years of paying four or five times what Americans pay for petrol, Europeans have adjusted their transportation habits, switched to cars that are more fuel-efficient and seem resigned to paying ever higher prices while continuing to explore alternatives.

Subway ridership in Rome skyrocketed this summer as Italians abandoned their cars. Germans are reportedly driving across the border into Poland for cheaper petrol, while Poles are crossing into Ukraine to buy even lower-priced fuel. London charges commuters and tourists a special tax for driving into the most congested areas of the city. Some European countries levy high taxes on new cars to discourage sales, and road tolls in some regions are prohibitive: Along one stretch of highway in central France, drivers are presented with a $9.25 bill for a trip of about 60 miles.

European governments have required car companies to develop more fuel-efficient automobiles with smaller engines, unlike in the United States, where petrol-guzzling SUVs rule the road, said Christopher Alexander Paillard, co-author of the recent book The Geopolitics of Oil. He and other analysts said the United States has put too much emphasis on increasing the supply of petrol and not enough on curbing its consumption.

“There is the hope that because of this terrible hurricane, public opinion in the US and the government might begin to understand that something has to be done on the demand level,” said Pierre Terzian, director of Petrostrategies, a Paris firm that publishes a weekly oil and petrol newsletter.

For Europeans, the problem is not the skyrocketing cost of oil, but the petrol taxes their countries add on, which in many cases account for two-thirds or more of the price of gasoline. For instance, if France did not levy a tax on gasoline, motorists here would pay about $1.98 a gallon for super unleaded, instead of about $7.09 a gallon.

“You can’t blame America or the Arabs” for high petrol prices, said a man in Paris as he topped off his four-wheel-drive Toyota.

“It’s because of the taxes. The government thinks that consumers are milking cows.”

As a result, European cities are crammed with petrol-efficient scooters and motorcycles that zigzag between gridlocked cars. In Paris, where it is rare to spot an SUV, some automobiles are so tiny that it is difficult to imagine people fitting inside. Eric Jacquet, a real estate agent who has three children, said petrol prices had risen so steeply in recent months that he increasingly uses a scooter to get around.

“The car costs me 10 euros more to fill up now than it did two months ago,” he complained. The amount is the equivalent of $12.50. He blamed the high demand for oil in China and India and low prices and high consumption in the United States. European analysts said it was too simplistic to label Americans as addicted to cheap petrol and big, lavish cars. In truth, they said, the size of the United States along with its climate and road system made SUVs necessary for many drivers, while the small streets of European cities and shorter border-to-border distances have led to the development of smaller, more fuel-efficient vehicles.

“I would volunteer that in Europe, you probably, on average, see 15 to 17 kilometres per litre,” or about 37.5 miles per gallon, said Eric Nielsen, chief European economist at Goldman Sachs in London, “and in the US it’s more like 10 kilometres per litre or even less,” or 23.5 miles per gallon.

At the same time, he said, “it’s clear that the US uses way too much energy ... compared to the rest of the world, and it’s clear that gasoline is very lightly taxed in the US, compared to anywhere else in the developed world. From the point of view that you have to raise taxes somewhere, it makes sense to raise them on the things you want to reduce the consumption of.”

Oil and economic analysts said they were concerned that strong demand to fill the US shortfall caused by Katrina would reduce global supplies and push oil prices even higher, which would increase the cost of producing goods around the world at the same time Americans are expected to reel in their spending.

“This is the first oil shock of the modern era of globalization,” Stephen S. Roach, chief economist at Morgan Stanley in New York, wrote this week in an analysis of the hurricane’s global fallout. —Dawn/The Washington Post News Service

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