Europeans Are Fed Up With High Fuel Prices

By Katrin Bennhold

James Kanter contributed reporting 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 Spain.

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When it comes to transportation, Marie Schneberger has always tried to be thrifty. As an airline employee earning a middle-income paycheck, the price of gasoline in France, like elsewhere in Europe, has made it prohibitively expensive for her to ever own anything bigger than a Fiat Panda.

But now that gasoline prices have surged past euro 1.40 a liter, or the equivalent of $8.21 a gallon, on much of the Continent, she has cut back even more. Recently, Schneberger started taking the Metro to work. Now, she shares her subcompact car with two other women to split fuel costs.

“This concerns everyone who drives,” Schneberger said. “And that makes a lot of angry people.”

Europeans have long modified their fuel consumption habits because of persistently high fuel prices, which are increased in most countries by more than half at the pump by government taxes.

Unlike in the United States, where the price of fuel has been relatively inexpensive until recently, gas-guzzling sport utility vehicles are a rare sight. Instead, European roads and highways are often populated with smaller, fuel-efficient models like the Smart car and the Mini, or vehicles powered by diesel, a trend that has lowered European demand for gasoline over the past decade. Most cities have highly developed public transport infrastructures. And green-minded policies have spawned everything from special bicycle lanes to congestion charges to electric-powered buses in urban areas.

“We are used to paying $200 a barrel for oil at the pump,” said Lawrence Eagles, chief market analyst at the International Energy Agency. That figure, he explained, is what European consumers are already effectively paying at gas stations when fuel taxes are included, despite the mitigating effects of a stronger euro, which reduces Europe’s cost for oil denominated in dollars.

But the current surge in the price of oil has come faster and more sharply than previous cycles of the past several years, when the price pushed past $80 a barrel, and then to $100. The cost of a liter of unleaded gasoline at the pump has climbed 17 percent over the past 12 months in Britain, 15 percent in Austria and 8 percent in France. Now, as oil hovers around $130, many Europeans are asking how much leaner they can become.

In the past week, waves of protest broke out across the Continent, as irate port workers clashed with riot police officers in Marseille and banner-wielding truckers disrupted traffic in London to demand government fuel rebates. The protests spread to truckers in the Netherlands on Thursday, while French farmers blocked the entrance of oil depots in several cities. Italian and Spanish fishermen were planning strikes Friday.

“There are signs of a flip point where energy consumption is becoming part of everyday thinking,” Eagles said.

Governments already under pressure from slowing economic growth and falling tax revenue are increasingly concerned that the anger could spread. On Tuesday, faced with furious truckers, President Nicolas Sarkozy of France called for the European Union to put a cap on the fuel sales tax – a proposal immediately shot down by other European countries who count on that income in their national budgets.

Prime Minister Gordon Brown of Britain, one of the principal opponents of the Sarkozy proposal, warned the following day that the world was facing an oil “shock.” His solution: get governments around the world to take coordinated global action to mitigate price increases. Britain, which has the highest fuel consumption taxes in Europe, granted licenses Wednesday for two new North Sea oil fields to encourage major oil producers to help stabilize energy markets.

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 EU member states not to provide tax relief to interest groups.

“You could start a vicious cycle, where it’s not just fishermen seeking lower taxes, but then it’s the road haulers, taxi drivers and so on, all of whom will seek the same special treatment, and not only in one country but in all the others where they will be complaining rightfully about unfair competition,” said Amelia Torres, a spokeswoman for Joaquin Almunia, the EU commissioner for monetary affairs.

In Germany, the largest European economy, the Federation of German Consumer Organizations is lobbying the government to invest euro 5 billion in public transportation and to allocate euro 10 billion 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.”

Incentives have worked in the past. The fuel taxes that were imposed by European governments after an earlier oil shock in the 1980s are the main reason Europe has a vastly more fuel-efficient car fleet that in the United States, Eagles of the International Energy Agency said. But greater energy efficiency in Europe has also made it harder for Europeans to make further substantial improvements. Many adjustments Americans are making now – switching to public transportation and buying smaller cars – Europeans started doing long ago, analysts say.

Nonetheless, the latest price shock has accelerated 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 a liter, or the equivalent of $8.71 a gallon, Leszek Tumkiewicz tries to leave his Polonez – a fuel-intensive communist-era car – at home as much as he can. “I drive a lot but I also try to be fond of the Warsaw Metro,” said Tumkiewicz, 50, a business consultant who lives 20 kilometers, or 12 miles, from the city center. “I try to make that my first choice.”

Higher gas prices have also prompted motorists to look for the best possible deal around. Drivers in Northern Ireland are increasingly making the trip south to fill their tanks in the Republic of Ireland where fuel duties are considerably lower. Thomas Colgan, 56, a father of three who works as a mortgage broker and part-time sheep farmer on the foothills of the Mourne Mountains, makes a 30-kilometer round trip to the Republic of Ireland twice a month to fill up the tank of his car. “I can get an extra five liters of diesel for my euro 50 by filling up in Ballymascanlon,” he said.

Not everyone is able to find more affordable fuel nearby or switch away from cars. In Milan, Marco Germani, a self-employed salesman who is constantly on the road, said he did not have a choice but to pay up. “The price is out of control, but unfortunately there is nothing I can do about it because I need to use the car for work,” he said.

Germani is no exception. 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 the consumption of expendable goods like takeout coffee in response to ever-higher fuel bills.

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

The diversion of crops normally used as animal feed to make biofuels has contributed to higher prices for eggs, meat and milk.

“Crude was our life and we didn’t know that everything depended on it,” said Maria Jose Aragon, a 56-year-old government worker in Madrid. “Groceries have gone up 20 to 30 percent. A loaf of bread that used to cost 30 cents now costs 55 cents.”

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 earlier.

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

In London, where diesel fuel costs about pound(s)1.27 a liter, or the equivalent of $9.50 a gallon, the highest in Europe, expectations for the government to cut taxes are high. Julian Popa, the manager of a moving company, says he has not yet raised his prices because “we’re waiting for the government to do something like reducing the levy or subsidize it somehow.”

Originally published by The New York Times Media Group.

(c) 2008 International Herald Tribune. Provided by ProQuest Information and Learning. All rights Reserved.