Oil protests take EU by storm

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Strikes and protests have spread across Europe amid growing anger at record-high oil prices, with leaders from the 27 EU countries at odds over the best response to the crisis.

Unhappy fishermen 

After three weeks of work stoppages and blockades staged by fishermen in France, the fishing industry in Spain, Italy and Portugal joined in the protest against high oil prices. Indeed, the rapid rise in the cost of oil has pushed up the price of marine diesel by around 30% since the beginning of the year, meaning trawler owners are facing bankruptcy, according to fishing federations. 

They are demanding state subsidies to help them offset some of these costs. But the European Commission shattered any hopes of EU assistance on Friday (30 May), when it announced that it instead planned to reinforce fishing limitations in the coming year. 

Massive overfishing and declining fish stocks are stated as justification for cutting the level of Total Allowable Catches (TACs) by up to 25% next year. 

While Europe still counts roughly 450,000 fishermen, the Commission says “fisheries today make a far smaller contribution to the European economy and food supply than they did in the past,” adding that the fishing industry will only become “profitable and sustainable” if “bolder action” is taken. 

“Fuel subsidies, besides being illegal, would do absolutely nothing to deal with the underlying problems. They would serve only to perpetuate the problems of the sector and make the crash even greater when it comes,” said European Fisheries Commissioner Joe Borg. “Act now to restructure. False solutions are not the way forward,” he said, calling for a “smaller, more fuel-efficient fleet that is better matched to fishing possibilities”. 

His proposals will however first have to be approved by a majority of member states. But national governments look set to come under even more pressure from the fishing industry this week. British fishermen are due to demonstrate tomorrow (3 June), while the secretary of Spain’s fishing federation, Cepesca, told Reuters he is “convinced that there will be a widespread stoppage”. “I expect that the European fleet will be tied up for the next 15-20 days,” he said. 

Widespread wrath 

Anger is also spreading rapidly to other sectors, including transport and agriculture, which have also been heavily hit by the price increases. 

In France, thousands of farmers demonstrated and blocked oil depots throughout the country. At the same time, dairy farmers in Germany went on strike, blaming rising fuel prices for pushing up their operating costs while the retail price of milk is actually falling after the EU raised production quotas by 2% (EURACTIV 07/02/08). They were followed by farmers in Austria, Denmark, Holland and Belgium.

Truck and taxi drivers also blocked the streets of London, Paris and Sofia last week, calling for government help. 

Governments divided on VAT cap 

But European governments are split on how to deal with the crisis. While protestors and industry are demanding immediate tax breaks, many governments and consumer groups are concerned that this will simply lead to a loss of public revenues and encourage unsustainable consumption patterns. 

Last week (27 May), French President Nicolas Sarkozy sided with the former group, calling for an EU-wide cap on value-added taxes on fuel. Indeed, VAT accounts for some 70% of prices at the pump in much of Europe and according to Sarkozy, the French government is earning an additional €150-170 million in VAT receipts every three months as a result of the explosion in oil prices. This money could be used to offset the worst impact of the fuel price rises, he said. Sarkozy’s Prime Minister François Fillon has suggested the issue will be discussed at the next European Council on 19-20 June.

But, despite support from Portuguese Economy Minister Manuel Pinho, Sarkozy’s proposals have already been met with widespread scepticism from the Commission and other European governments. 

Slovenia, which currently holds the rotating EU presidency, refused to call an emergency meeting as requested by Pinho. Austria’s Finance Minister Wilhelm Molterer warned of the long-term effect tax cuts would have on state revenues, asking: “What will you do when prices fall again, reintroduce the tax? I’d like to hear the political discussions then!” 

The European Commission warned against starting a “vicious circle” whereby if lower taxes are approved for fishermen, “road haulers, taxi drivers and so on, all of whom will seek the same special treatment, and not only in one country but in all the others, […] will be complaining rightfully about unfair competition”. 

Amelia Torres, a spokeswoman for Joaquin Almunia, the EU commissioner for monetary affairs, further noted that tax cuts would send the wrong signal to oil-producing countries that European states were willing to absorb rising gas prices. “Modifying the fiscality of fuel to fight the rise in oil prices would send a very bad signal to oil-producing countries. We would be saying that [they] can raise oil prices and this will be paid for by the taxes of Europeans,” she said. 

Carbon markets up 

On a more positive note, carbon market analysts were optimistic as prices of tradable CO2 allowances rose by as much as 25% in the past three months. According to the WWF, the hike has been driven by electricity producers’ switch from gas to coal – which although cheaper, emits more CO2 per watt, warranting the purchase of additional emission permits. 

Rock-bottom carbon prices, due to too high an allocation of pollution permits since the scheme first started in 2005, had raised serious questions as to the credibility of the EU’s flagship scheme for reducing greenhouse gas emissions in the bloc (EURACTIV 09/11/06). But the current surge in prices should give a boost to the cap-and-trade principle ahead of key global climate change conferences this year. 

A barrel of oil today costs more than twice as much as it did just one year ago while average prices at the pump have risen by 50-100% over the past five years in much of Europe. 

As crude prices last week soared past the level of US $130 a barrel, many analysts are predicting that the climb is far from over, with forecasts of oil at $200 a barrel seeming increasingly realistic. 

This is the steepest price increase since the 1970s, affecting oil-intensive industries such as fishing, trucking and agriculture, but also ordinary people in their everyday lives. 

Indeed, it is not simply getting from A to B that has become more expensive, but, according to the EU's statistical agency Eurostat, the cost of living is rising rapidly, with inflation in the euro area reaching a historic peak of 3.6% in May. Much of this is said to be caused by oil price increases. 

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