Gas taxes under global attack

From Britain to Bangladesh, rising oil prices this week are fueling citizen ire, and governments are responding.

If the soaring price of gasoline angers you each time you fill your tank, here's a little consolation: You are not alone.

Across the globe, pump prices are fueling frustration. In France, protesting fishermen this week dumped loads of sardines in front of government offices and blocked every port in the country. In Thailand, 1,000 truckers converged on the capital, Bangkok. In Bangladesh, a fuel strike Wednesday brought the country to a standstill.

And governments are listening to this citizen revolt, directed largely at high taxes on fuel. In bids to stay popular, political leaders are cutting gasoline taxes to help motorists and businesses. But in doing so, they are reversing the environmental policies aimed at reducing energy consumption and slowing global warming.

"If you are weak on fuel taxes, you are weak on climate change," warns Tony Bosworth of the British environmental group Friends of the Earth. "You send out all the wrong signals." Crude-oil prices topped $32 a barrel earlier this week - the highest since the Gulf War 10 years ago. The effects have been felt all over the world, and public discontent has reached boiling point in many countries.

In Britain, hundreds of thousands of motorists have joined a "Dump the Pump" rolling boycott of filling stations to express their anger at the steady rise in gas prices - already the highest in Europe at about $5 a gallon - and especially at the taxes that make up nearly 80 percent of the price.

In Australia, the government is fighting off a rebellion in its own ranks from members of Parliament who want to freeze gas taxes. In Southeast Asian countries, fishermen, taxi drivers, and truckers have all staged demonstrations, following the example of US truckers who clogged the streets of Washington last winter to protest high diesel prices.

In their anxiety to assuage citizens' anger, many governments have made concessions, cutting the taxes that they slap on all fuel, from home heating oil to gasoline.

"Tax cuts appear to be an idea whose time has come," says Malcolm Gladstone, an energy expert at the University of London. The protests "have frightened governments," he says.

France's Finance Minister Laurent Fabius announced yesterday that as part of a sweeping tax reform the heating fuel tax will be cut by 30 percent and the Value Added Tax (VAT) on all oil products will be frozen.

The British government has already abandoned its ecology-conscious "fuel-tax escalator," whereby gasoline prices automatically rose 6 percent more than inflation each year. The Thai government dispersed the truckers' protest by promising to subsidize diesel prices, and the Malaysian industry minister this week pledged to help companies whose energy costs have risen.

Italy and Greece have cut gas taxes this year, and the Portuguese government has adopted a sliding scale by which taxes automatically fall with each jump in the price of oil.

These efforts to keep pump prices down, however, fly in the face of previous policies designed to discourage fuel consumption. At the climate-change conference in Kyoto, Japan, three years ago, industrialized countries pledged to reduce their greenhouse-gas emissions 5.2 percent from 1990 levels by 2012; since vehicle emissions are a major culprit, most of them had been deliberately increasing gas taxes to make motorists think twice before taking their cars out.

"People respond with their pocket books," says Jerome Sheridan, an economist who heads American University's Brussels center. "If prices fall, people will use more fuel."

"There is pressure to reduce taxes, but that would be a very bad thing," argues Stefan van Kerk, an energy official at the European Commission. "It would send the wrong message to OPEC [Organization of Petroleum Exporting Countries] that if they raise prices, we will lower taxes; and also in the long term, what is important is to answer the environmental concerns."

That, says Dr. Sheridan, means that "governments have very few options. The best one is to put pressure on OPEC countries to boost production."

OPEC has raised production twice this year, but crude-oil prices continue to climb - largely because the US economy is booming, Europe's economies have picked up, and Asian countries have bounced back from their crisis two years ago.

Saudi Arabia appears willing to help consumer countries, promising on Wednesday to work with other OPEC countries for a "suitable rise" in oil output at a meeting on Sept. 10. But smaller producers already pumping at maximum capacity, would like to see prices stay above $30 a barrel for as long as possible.

Still, notes Peter Beck, an oil specialist at the Royal Institute for International Affairs in London, "OPEC remembers the world recession" that followed the 1973 "oil shock"... They know it is very easy for high prices to end up causing a drop in demand."

Most economists say that high oil prices today will not have the catastrophic effect that they did in the 1970s. Industrialized countries rely more on services and less on energy-guzzling manufacturing for their wealth today.

Indeed, argues Alain Lipietz, a French Green party member of the European Parliament, today's oil prices should be seen not as a problem but as "an opportunity to foster energy saving policies."

(c) Copyright 2000. The Christian Science Publishing Society

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