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FOCUS: Protests Over Soaring Fuel Costs Spread In Europe

   By Emma Charlton and Christopher Emsden 
   OF DOW JONES NEWSWIRES 
 

About 200 fishermen battled with police in the streets of Paris Wednesday as European protests against soaring fuel prices stretched from the U.K. to Bulgaria.

France's politically powerful fishing unions want the government to better 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.

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

The Paris clashes came as Brent crude oil futures for July delivery, the benchmark product for Europe, jumped more than $1.00 Wednesday to hit an all-time high of $129.70, driven up by apparently robust demand and evident 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. car drivers for gas.

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 the eco tax, used to help finance the state pension scheme, slashed. "The threshold of pain has been reached for car drivers," said Otto Saalmann, a spokesman for ADAC. "Millions of car drivers don't do it out of fun but because they have to get to work."

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.

Elio Lannutti, head of the Italian consumer lobby group, Adusbef, is demanding that the fuel excise tax be cut by four to five euro-cents a liter to help cushion household budgets. 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.

Smidbersky 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 excises 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 in Downing Street. The action marks an escalation from a protest last month, when 65 trucks blocked traffic in some of London busiest thoroughfares.

U.K. hauliers claim rising oil prices now mean that fuel represents over 40% of their total operating costs, up from 30% just six months ago, plunging their industry in to crisis.

"The haulage industry is on its knees, it's unable to recover all these price increases," said Mike Presneill, a haulage contractor from Kent who will take part in the protest.

"Many thousands of people, haulage companies are going to the wall, their customers can't accept these price increases," Presneill said. "Last week we incurred an extra 4 pence per liter, this week we've already seen an additional 1.5 pence per liter rise."

He said if nothing was done he could see a repeat of the action taken in 2000, where widespread protests brought U.K. roads to a standstill.

Brown, the U.K. prime minister, hardened his anti-OPEC rhetoric this week, denouncing the cartel as a "scandal" and calling on the E.U. and G8 to break down its control.

"It is, as people will recognize, a scandal that 40% of the oil is controlled by OPEC, that their decisions can restrict the supply of oil to the rest of the world, and that at a time when oil is desperately needed, and supply needs to expand, that OPEC can withhold supply from the market," Brown said Tuesday.

-By Christopher Emsden and Emma Charlton, Dow Jones Newswires; +39-02-58-21-99-05; chris.emsden@dowjones.com Andrea Thomas in Berlin, Sean Carney in Prague and Edith Balasz in Budapest contributed to this article

(END) Dow Jones Newswires

May 21, 2008 10:30 ET (14:30 GMT)


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