European politicians wrestle with high gasoline prices

PARIS: With the price of oil hurtling toward $100 a barrel and prices at the pump rising sharply, politicians across Europe may soon be weighing how to deal with the onerous cost of filling a tank.

Since the start of the year, diesel prices in France, where protests have started, have risen by nearly 17 percent as fuel retailers like Total and Shell charge more, following the cost of crude oil upward. Consumers in Europe already face costs far higher than in many parts of the world because of hefty taxes.

"It's a very difficult situation for governments," said Colette Lewiner, an energy expert at Capgemini, a consultancy. "What governments should be doing is lowering the tax on the oil products, but that would mean lowering their own expenses and breaking spending promises, so governments are trapped."

A big worry is that fuel price rises are contributing to an inflationary price spiral. Another is that past increases have triggered paralyzing national strikes. But European governments rely heavily on fuel taxes to balance their budgets, drastically reducing the scope for cuts.

In France, for example, taxes on unleaded gasoline represent 62 percent of the cost of a liter of fuel at the pump, while taxes on diesel represent 53 percent, according to the Union Française des Industries Pétrolières. Those taxes are the largest source of state revenues after value-added tax, income tax and business tax, said the industry association.

And while some of the most vocal groups, like fishermen and truckers, make up only a fraction of the European workforce, they require large amounts of fuel, and have used highly effective tactics like roadblocks and refinery blockades to force France and Britain into substantial concessions.

French fishermen, who already benefit from hefty fuel subsidies, have mounted the strongest protests so far over fuel costs.

This month, the fishermen - some of whom use several hundred of liters of diesel each day to power their boats - blocked fuel depots in Atlantic coastal regions to draw attention to costs that have climbed to about 50 euro cents a liter up from about 30 euro cents a liter. Only below 30 euro cents a liter can fishing be profitable, they say.

Amid reports that some gas stations in Brittany were running dry, the fishermen went back to sea Thursday, after President Nicolas Sarkozy of France visited the Atlantic coast and personally offered concessions Tuesday.

French farmers are also clamoring for aid. The government is resisting, further raising the farmers' hackles.

A "relaxed attitude runs a strong risk of igniting the anger in the countryside," a federation of farmers in the Pas-de-Calais region of France warned the government this week in a message posted to the Web site for the National Federation of Agricultural Workers' Unions.

In Belgium, price increases have hit farmers hard, too, particularly those who use oil to heat greenhouses, said Carla Siongers, energy consultant for the Flemish farmers' union, Boerenbond.

Siongers said she knew of three or four greenhouse businesses thinking of closing since fuel costs had shot to about one-third from one-fifth of the overall cost of producing greenhouse food.

"For all the other farmers who use tractors or electricity, the rise in their costs is significant," she added.

But some of the most serious trouble may be brewing on Spanish farms. There, the agricultural sector is in the midst of what farmers say is their worst crisis in 20 years, prompted by high feed prices and an outbreak of bluetongue virus, an insect-borne disease that affects sheep and cattle.

Asaja, the biggest Spanish agricultural association, has called a march in Madrid for November 29 to protest what it sees as a lack of government assistance to the sector, foreshadowing an issue that could become a sore point for the government of Prime Minister José Luís Rodríguez Zapatero, as it prepares to contest a general election in March.

"If this latest rise in crude prices combines with high feed costs, we will have the mother of all crises," warned José Luís García Palacios, president of Asaja.

So far other Europeans are reacting with less ferocity to higher oil prices.

One reason is that fuel taxes - while generally much higher in Europe than in countries like the United States - still vary markedly across the continent, with countries including Austria, Ireland and Luxembourg at the lower end of the range.

In Switzerland, diesel prices have risen nearly 13 percent to 1.92 Swiss Francs since the start of the year. Gasoline is up more than 14 percent to 1.83 Swiss Francs per liter, or $6.13 per gallon.

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