Taxes account to 20% of gas prices in the US. Europe is 2/3! One gallon in Europe costs $6.
Europe, With Other Woes, Takes Gas Prices in Stride
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By MARK LANDLER and CARTER DOUGHERTY
Published: September 1, 2005
FRANKFURT, Aug. 31 - Tiziano Colombo, an engineer from Milan, hit the road this summer, driving with his wife and in-laws in a rented van through Austria, Germany, Belgium, Holland and France.
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Agence France-Presse - Getty Images
A driver fills his tank in France, where the base price of gasoline is higher than in the United States.
With oil prices rising during his two-week vacation, Mr. Colombo spent $670 on diesel to fill his Ford Transit. By his arithmetic, it was still cheaper than buying train tickets for four people. The cost of traveling by car would have to nearly double, he said, before he would consider switching.
"The car is freedom, and freedom is what we were after," Mr. Colombo, 53, said, sounding like an American. "Obviously, if I was doing this trip by myself, you'd have a hard time justifying the extra cost."
Soaring oil prices have begun to rattle Europeans, just as they have Americans, with the disruption of oil production in the United States by Hurricane Katrina driving gasoline prices in Europe to new records as well.
But the reaction of Europeans has been less dramatic because of the higher base price of fuel, the strength of the euro against the dollar and Europe's three-decade search for alternatives to fossil fuels, which has made it a bit less vulnerable to spikes in the price of crude oil.
The biggest difference, say economists, is that Europeans are distracted by other things, like economic stagnation in Italy or double-digit unemployment in Germany. Next to these problems, paying 1.30 euros a liter, or the equivalent of $6 a gallon, for gas does not seem like a calamity.
"Americans live in a wonderful world, with 3.75 percent growth and nearly full employment," said Jörg Krämer, the chief economist of the HVB Group in Munich. "They can afford to worry about fuel prices. We have other problems."
In Germany, the closely watched GfK survey of consumer confidence rose in August for the first time in five months, even as oil prices hit records. A reason for the renewed optimism was polls showing that the German government was likely to be ousted in elections on Sept. 18.
Many here blame Chancellor Gerhard Schröder for failing to cure Germany's chronic high unemployment, which recently set a post-World War II record. His conservative challenger, Angela Merkel, has put job creation and tax changes at the top of her agenda.
Even so, few people expect the conservatives will scrap the so-called ecotax on fuel, which the Green Party pushed for in 1998 when it took over the environment ministry in a coalition with the Social Democrats.
For one thing, Germany desperately needs the revenue generated by the tax to narrow its yawning budget deficit. For another, Germans are not really protesting the levy, which adds 15 cents a liter to the price of gasoline (all told, taxes account for two-thirds of the price of gasoline in Germany; diesel fuel, which is more efficient, is taxed at a lower rate to encourage its use).
"I'm sometimes astonished at how much the German voter can take of this," Roland Koch, the prime minister of the state of Hesse and a leading member of the conservative Christian Democrats, said in an interview. "It's like a powder keg that has no clear trigger."
There is evidence that German consumers are using less gasoline, or at least buying less. The association of German gasoline sellers, MWV, has registered a 5 percent drop in sales since the beginning of the year.
The gasoline industry also suspects that more Germans are crossing the border to countries like Poland and the Czech Republic, where fuel taxes are lower. Recently, German police fined a man in a van as he tried to smuggle 2,000 liters of diesel from Luxembourg, another lower-tax country.
But energy costs have scarcely intruded on the political debate. When Jürgen Trittin, the environment minister, urged Germans, in an interview with the mass-market newspaper Bild, to leave their cars at home and use more public transportation, he was roundly dismissed by readers, many of whom said they needed cars to get to work.
Some of this resistance may be because of fatigue. Germans, like most Europeans, changed their habits to curb the use of fossil fuels three decades ago, after the oil shock of the 1970's. To some people here, calls for energy conservation are not as much unwelcome as unnecessary.
Moreover, Europe's steep fuel taxes have, paradoxically, cushioned the blow: many of those taxes are fixed, leaving only the underlying oil price to fluctuate. In the United States, increases in crude oil prices can lead to more pronounced increases at the pump, because some taxes are levied as a percentage of the gas price. The strong euro has played a mitigating role, too, by acting as a hedge against changes in the dollar-denominated oil market.
German officials warn that high fuel prices will hobble the country's growth. But some economists say that fear is misplaced. Much of the upward price pressure, they note, stems from rocketing demand in China, which, in turn, imports heavy machinery and other goods from Germany.
"Expensive oil is the price for letting China grow, which is beneficial for us," Mr. Kramer of HVB said.
Rising fuel prices do annoy Germans, according to GfK, the market research company in Nuremberg that conducts the consumer confidence survey. But this pales in comparison to the fear of unemployment, which 81 percent of those surveyed consider the country's No. 1 problem.
"If I have a job, I can complain about the cost of filling up my car," said Klaus Wübbenhorst, the chief executive of GfK. "If I don't have a job, I'm going to be on foot anyway."
In a survey of consumers throughout Europe, GfK found that inflation trailed joblessness as a cause of anxiety (it did not ask specifically about oil).
Only 11 percent of those surveyed in Germany, and 4 percent of those in Britain, said prices were the biggest problem. Among French and Italians, inflation was a greater concern, cited by 29 percent and 25 percent, respectively.
Notwithstanding holdouts like Mr. Colombo, Italians do seem to be switching from cars to trains. Ferrovia dello Stato, which runs much of Italy's train system, reports that its number of riders has risen substantially this year, which it attributes in large part to fuel prices.
This is particularly true on lines that serve commuters. On one of the busiest lines connecting Rome with its outlying suburbs, the number of riders increased 300 percent in the last five years and continues to rise.
Still, in Italy as in Germany, oil prices have taken a back seat to other concerns. Italy's competitiveness has deteriorated in recent years. Its textile industry is being buffeted by a trade dispute between Europe and China. And its economy lingers on the edge of a recession.
In France, however, rising oil prices loom as a political problem. Prime Minister Dominique de Villepin has vowed to help workers and less well-off citizens cope with the pain.
He said the government would take surplus taxes from any windfall created by higher prices and redistribute it in the form of tax breaks to workers in industries that rely most heavily on fuel - including truck and taxi drivers, farmers and fishermen.
"The rhetoric from the truck drivers is becoming more and more aggressive, and already some of the drivers are talking about blockades," said Laurence Boone, an economist with Barclays Capital in Paris. "The question then is how far Villepin will go to thwart that kind of public discontent." |
