labels: Economy - general
Now oil price hike sends Europe on boil; British PM calls for global action news
29 May 2008

Gordon Brown, British Prime Minister It is a universal truth that man cannot survive without water, but it's a truth no less profound that the global economy cannot survive without oil. If global inflation and the food crisis are any indication, even an increase in the price of crude can have catastrophic consequences for the world's population.

Even as Europe is on boil with different heads of state contemplating remedial measures to mitigate the pains, British Prime Minister Gordon Brown yesterday called for ''global solutions'' to the ''global problem.''

In an article published in The Guardian newspaper and on his Web site, www.pm.gov.uk, Brown said that the global economy ''is facing the third great oil shock of recent decades'', with oil costing $135 a barrel as compared to $10 a barrel ten years ago. He said he was conscious of the plight of families struggling to absorb ''the impact in the cost of filling up at the petrol station and in the rise in gas and electricity bills.''

''However much we might wish otherwise, there is no easy answer to the global oil problem without a comprehensive international strategy,'' Brown said, adding that the problem should be made a ''top priority'' at the European Union (EU) summit next month and the gathering of G8 leaders in July.

Brown also mentioned, what he considers, the cause of rising prices. At the top the list were increased energy demands of developing countries and limited production by the oil-producing nations.

One of his obvious targets was the Organisation of Petroleum Exporting Countries (OPEC), which he blames for not easing supply pressures even in the face of record prices. Tellingly, the same reason was behind Indonesia's decision to leave the organization a day back. (See: Declining production forces Indonesia to quit OPEC)

However, he did not place the entire responsibility of curtailing consumption and costs on the oil exporters. Brown said that his government's goal ''that Britain becomes a low-carbon economy is now an economic priority as well as an environmental imperative'', and that ''Britain, Europe and the world will have to change'' how and what energy is used.

As for specifics, he mentioned that Britain ''will increase its investment in renewables, including decentralised generation'' and ''will build one of the world's first commercial-scale carbon capture and storage coal plants''. He reiterated his government's commitment to a nuclear building programme to ''ensure that the UK's emissions and dependence on fossil fuels do not rise as existing nuclear stations close''.

Brown also underlined the importance of dialogue and transparency between oil producers and consumers, saying such a step will ensure ''a better understanding of trends in supply and how they affect the price of oil''.

However, no country can shun its individual responsibility to reduce domestic consumption. In this context he mentioned ''increased winter fuel payments; a new one-stop service on home energy efficiency; free insulation for people on low incomes and the over 70s and a £150 million programme financed by the utility companies to cut fuel bills for lower income families''.

Brown's article was published a day after truck drivers protesting increases in the price of diesel fuel paralysed parts of London by driving slowly in convoys and halting their rigs on a busy highway leading into the west of the capital. Other truckers took similar action in Wales.

The protests mirrored action by French fishermen, who blockaded ports on the English Channel. After the weeklong agitation, which left several tourists stranded, was called off, French truckers and farmers stepped up their own protests over soaring fuel prices.

A group of 300 farmers used their cars to block the entry to a Total fuel depot near Toulouse, while around 40 protesting truck drivers slowed traffic to a near-halt on Bordeaux's main ring road.

On Wednesday, more than 150 truck drivers and dozens of bus drivers from across Bulgaria converged in a convoy on the outskirts of the capital, Sofia, saying high fuel prices had them operating at a loss. Similar protests took place in the Black Sea port city of Varna, the Danube port city of Russe and other towns.

In addition to the demonstrations in France and Britain, Spanish truckers have joined fishing boat crews in protesting the cost of fuel and demanding that the EU relax its rules to permit higher subsidies from their governments, failing which they have threatened to go on indefinite strike from 8 June.

Italian, Greek and Portuguese fishermen have threatened to strike later this week. Dutch truckers plan a national day of action Thursday and in Spain, the Fishermen's Confederation has called a protest in Madrid for Friday.

The heads of different European governments have made several proposals, some of them conflicting, to ease the pressure. French president Nicolas Sarkozy suggested reducing the value-added taxes (VAT) on fuel to offset increases in the price of crude oil.

French consumers pay about 19.6 per cent VAT on the price of fuel and Sarkozy renewed his reduction proposal on Wednesday during a visit to Warsaw.

"Should we really apply the same tax rate when the price of a barrel of oil has doubled in one year and tripled in three years? I don't think this is a crazy question to be asking," Sarkozy told reporters in the Polish capital.

However, this idea did not meet with universal approval. One of the opponents, Austrian finance minister Wilhelm Molterer responded, "What will you do when prices fall again, reintroduce the tax? I'd like to hear the political discussions then.''

Additionally, the European Union's economic and monetary affairs commissioner, Joaquin Almunia, told reporters Wednesday that euro-zone finance ministers would not back such tax changes.

Portugal's economy minister Manuel Pinho called on Slovenia, as current head of the European Union, to hold an emergency debate on the crisis, but Slovenian Prime Minister Janez Jansa said it would have to wait for the scheduled EU summit next month.

"There's no sense in calling an urgent meeting since we'll discuss the issue at our regular June session," Jansa said, while adding that the issue would be placed high on the agenda.


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Now oil price hike sends Europe on boil; British PM calls for global action