Irate Europeans Protest the Soaring Price of Gasoline - 053008 NYT

http://www.nytimes.com/2008/05/30/business/30fuel.html?sq=irate%20europeans&st=cse&scp=1&pagewanted=print

May 30, 2008 - NY Times
Irate Europeans Protest the Soaring Price of Gasoline
By KATRIN BENNHOLD

PARIS — Marie Schneberger has always been thrifty about gasoline. The high price of filling up made it prohibitively expensive for Ms. Schneberger, a middle-income airline employee, to own anything bigger than a Fiat subcompact.

But with prices surging past 1.40 euro a liter in France (about $8.20 a gallon), Ms. Schneberger’s old economies have proved insufficient. So, she recently started taking the Métro to work and splitting the use of her car with two other women, to share fuel costs.

Gas prices that make drivers queasy at the pump are a relatively new occurrence in the United States, but persistently high prices forced Europeans to curtail their fuel consumption long ago. (In many countries, government taxes account for more than half the price.)

Highways are filled with fuel-efficient Smart cars and Minis, most cities have highly developed public transportation systems, and green-minded policies have spawned everything from special bicycle lanes to downtown congestion charges. Now the current surge in the price of oil has many Europeans asking how much leaner they can become.

“This concerns everyone who drives,” Ms. Schneberger said. “And that makes a lot of angry people.” Indeed, protests broke out across the Continent this week as irate port workers clashed with the riot police in Marseille and truckers stopped traffic in London to demand government fuel rebates. On Thursday, the protests spread to truckers in the Netherlands and French farmers blocked the entrance to oil depots. Italian and Spanish fishermen were planning strikes for Friday.

Less audible, but no less angry, are French nurses fretting about the cost of making home visits in their cars, Italian travel agents worried about fueling tour buses, and families from Madrid to Moscow who are leaving their cars at home or reducing spending in other areas.

European governments, already under pressure from slowing economic growth and falling tax revenue, are increasingly concerned the anger could grow. On Tuesday, faced with furious truckers, President Nicolas Sarkozy of France called for the European Union to cap fuel taxes — a proposal immediately rejected by other countries that count on the income to bolster their budgets.

The problem in Europe is that the upsurge has come faster and harder than in previous cycles. For instance, the cost of a liter of unleaded gasoline surged 17 percent in the last 12 months in Britain, 15 percent in Austria and 8 percent in France.

Prime Minister Gordon Brown of Britain, a major opponent of the Sarkozy proposal, warned that the world was facing an oil shock. His solution was to persuade governments around the world to take coordinated global action to mitigate price increases.

Britain, which has Europe’s highest fuel consumption taxes, granted licenses Wednesday for two new North Sea oil fields.

But as protesters and industry groups press for immediate tax breaks, analysts, European officials and consumer groups are concerned that artificially lowering prices would only engrain a consumption pattern that is not sustainable.

Instead, they say, politicians should provide long-term incentives to reduce fuel use and increase energy efficiency. The European Commission said Thursday that short-term relief should be narrowly focused on the poorest families, and warned European Union states not to provide tax relief to interest groups.

In Germany, Europe’s largest economy, the Federation of German Consumer Organizations is lobbying the government to invest 5 billion euros in public transportation and to allocate 10 billion euros in subsidies to households that install energy saving devices.

“Dealing with the issue through taxes is not the solution,” Holger Krawinkel, director of the federation’s energy department, said Thursday. “We need a serious commitment to investing in energy saving schemes.”

Such incentives to reduce consumption have worked in the past. Fuel taxes imposed after an oil shock in the 1980s are the main reason Europe has a vastly more fuel-efficient car fleet than the United States, said Lawrence Eagles, chief market analyst at the International Energy Agency.

But greater energy efficiency in Europe has also made it harder for Europeans to make further substantial improvements, analysts say.

Yet, the latest price shock has reignited the trend. Moshiur Rahman, a 28-year-old newspaper vendor in London, said higher fuel prices meant that he could no longer afford to drive to work. He now travels more than an hour by train every day.

“I have been sharing a car with a friend but it has just become too much money,” he said.
In Warsaw, where gas prices are nearing 5 zloty ($2.31), a liter, Leszek Tumkiewicz tries to leave his Polonez — a fuel-intensive communist-era car — at home. “I drive a lot but I also try to be fond of the Warsaw Metro,” said Mr. Tumkiewicz, 50, a business consultant who lives 12 miles from the city center.

Higher gas prices have prompted motorists to look for the best possible deal around. Drivers in Northern Ireland are making the trip south to fill their tanks in the Republic of Ireland, where fuel duties are considerably lower.

Not everyone is able to find cheaper fuel or reduce their driving. In Milan, Marco Germani, a self-employed salesman who is constantly on the road, said he had no choice but to pay up. “Unfortunately there is nothing I can do about it because I need to use the car for work,” he said.
Particularly in rural areas, where public transport is more limited, high energy costs take their toll elsewhere. Analysts call it the “Starbucks effect” — a decline in discretionary consumption in response to higher fuel bills.

The effect is hard to measure, especially because many products have increased in price as a result of rising transportation costs. In Spain, for example, where gasoline costs 1 to 1.25 euros a liter, many consumers are grumbling more about the accompanying rise in grocery bills than the price at the pump.

Even in Russia, one of the world’s largest oil producers, consumers have cut back spending and demonstrations by disgruntled drivers have erupted after prices at the pump rose by more than 7 percent from a year ago.

“The prices are nightmarish,” said Arutsun Hachaturyan, the manager of a jewelry business, who said he pumps about $1,200 in gas a month into his black Range Rover. “This is Russia,” he said, while filling his tank at a Moscow gas station. “We live on oil.”

The only solution, said Ms. Schneberger, the airline worker in Paris, is to “become less dependent on oil.”

But as fears of high energy costs merge with broader concerns about slipping standards of living, the calls for tax cuts are growing louder, suggesting that farmers, truckers and fishermen may end up with broader support in the general public.

In London, for instance, expectations of government tax cuts are high. Julian Popa, the manager of a hauling company, said he had not yet raised the prices he charges customers because “we’re waiting for the government to do something like reducing the levy or subsidize” oil.

Reporting was contributed by James Kanter from Brussels, Judy Dempsey from Berlin, Eamon Quinn from Dublin, Julia Werdigier from London, Michael Schwirtz from Moscow, Carter Dougherty from Warsaw, Eric Sylvers from Milan, Dan Bilefsky from Paris and Dale Fuchs from Madrid.