He does now. And so does every chauffeur-driven head of government in Europe. By the time the crisis in Britain finally began to ease at the end of last week, virtually every gas station had been drained by panic buying and the country was within a day or two of coming to a complete standstill. Even as Britain emerged from its chaos, protests left the streets of Brussels empty, truckers blocked highways into Barcelona, “drive slow” demonstrations snarled traffic in Ireland and Poland. In Italy, meetings between the government and trucking groups struck a deal to lower fuel costs, forestalling demonstrations there. In Germany–the land of Fahrvergnugen (“driving pleasure”) –protests shut down the border with Belgium. And in The Hague, Jeroen van der Veer, second in command at Royal Dutch/Shell, was sufficiently concerned about a truck blockade to advise guests to a Friday lunch to leave their cars at home and take public transport. It was “a week which has run like wildfire,” said Peter Gignoux, manager of the petroleum desk at Salomon Smith Barney in London. “I think everyone has responded very nervously to this.”
“This” is Europe’s fourth oil-price shock in 30 years. The OPEC cartel was the villain during the last three, in the early and late 1970s and in 1990. Not this time. Beginning in France two weeks ago, moving on to Britain last week, rolling on across the Continent and into this week, Europe’s new wave of protesters has a new villain: their own governments. Crude-oil prices may have tripled since late 1998, as they had in the earlier shocks, but this time protesters were not burning oil sheiks in effigy; they were carrying placards like Blair go truck yourself. The feeble euro shares part of the blame; for Europeans, its weakness against the dollar adds about $6 a barrel to the price of crude. But it is tax that represents the biggest chunk of the price at the pump in Europe. “How has that got anything to do with OPEC?” said Ray Holloway, director of Britain’s Petrol Retailers Association. “The politicians are to blame for this.”
Holloway has a point. OPEC-driven price increases can be blamed for fat VAT revenues at the pump–but not for other taxes. The value-added tax is a sales tax and is calculated as a percentage of price, ranging from 12 percent in Luxembourg and Portugal to 25 percent in Denmark and Sweden. But governments set the energy taxes that have launched pump prices into the stratosphere (chart). Petrol in Britain that costs $1.15 per liter is 76.2 percent tax. In the United States, gas is 45 cents per liter, of which 22.8 percent is tax. The lesson in Europe to be learned from the pump-price protests of 2000 is no mystery, says Colin Robinson of the Institute of Economic Affairs in London: “We’re getting to the limits of taxable capacity. This is a revolution about taxes.”
It’s a revolution that goes straight to the heart of the center-left thinking dominant in European governments. The evidence suggests that high energy taxes have made Europe much more fuel-efficient than the United States, where energy taxes are among the lowest in the world. But there’s nothing particularly “green” about the way the tax money is used. As a rule, energy taxes are not earmarked for particular projects. Some of the money might be used for alternative-energy projects, road-building schemes or public transport, but most of it joins up with income-tax revenue to fund bedrock societal projects like health, education and welfare. In Germany, energy taxes are crucial to propping up the bankrupt pension system. In France, as in Britain, Germany and other EU states, energy taxes have become all but indispensable to the national treasury: last year the take in personal income taxes ($42 billion) was only twice the revenue from fuel taxes ($21 billion).
The French answer to its protesters was to give in, a little. To prevent his country from grinding to a halt, Prime Minister Lionel Jospin offered concessions to truckers, farmers, fishermen and other groups, amounting to $396 million–a 1.9 percent cut in fuel taxes. In Britain, Blair hung tough, counting on the fact that the well-organized protesters–many of whom were self-employed, middle-class Britons–wouldn’t want to be held responsible for the true chaos that would have come if the refinery blockades had gone on much longer. The protesters blinked first, but only after they calculated that the government would offer some relief by November, when it will announce its budget plans for next year.
That was the pattern for other European governments last week, with a little fudging. Chancellor Gerhard Schroder vowed not to cut fuel taxes, but as protests mounted he did promise special relief to German farmers, pensioners and lower-income families. In Spain, a spokesman for a coalition of truckdrivers, farmers, fishermen and taxi drivers threatened to “Frenchify the conflict.” But the government stood firm. “Either we reduce consumption or increase production,” said Finance Minister Rodrigo Rato. “In this situation it would be irresponsible to encourage consumption by lowering taxes.”
This is not the end of the story. There’s a consensus among oil analysts that crude, having passed $30 a barrel, is heading toward $40, maybe higher. That would be a crisis that few would deny. Kuwait’s oil minister, Sheik Saud Nasser al-Sabah, in an interview with NEWSWEEK, tried to be sanguine about it: “Leave it to market forces, something always told to us by the major industrial nations. Well, here we are, market forces.”
But limits are being reached. As Royal Dutch/Shell’s van der Veer, with the air horns of 400 trucks audible in the distance, told his luncheon guests on Friday, “The feeling ’enough is enough’ has crossed all European borders.” If he’s right, Sweden could be the country to watch. In Sweden, fuel taxes are more than five times what they were in 1978, and yet fuel protests have not caught on. Tomas Nilson of the Swedish Automobile Association remembers when, in September 1998, his organization begged drivers to protest fuel prices by standing still in their cars for a few minutes. “Almost nothing happened,” he recalls wistfully. “Swedes aren’t like the French or the British. They are shy; they clench their fists in their pockets and grumble. At most they’ll put a sticker on their car.” But then the British weren’t like the French. Until last week.
