Fretting over oil prices intensifies

Demonstrations over high petrol prices are nearly over in the UK, but high prices are still being blamed on OPEC.

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By  David Ingham Published  September 14, 2000

Angry demonstrations over high petrol prices are coming to an end today in the UK. But the arguments over who's to blame for high petrol prices across Europe will rage on, with governments there trying to blame OPEC members.

As this correspondent saw on a recent trip to the UK, fuel costs in Europe are getting way out of hand. Whilst it costs only 40 UAE Dirhams or less to fill an average size car in the UAE, it costs £40 sterling to fill a small car in the UK. Remember that the Dirham is roughly six to the pound, so that's more than 200 Dirhams to fill a car in the UK.

The culprit of all this? Most definitely the exchequer and its massive duties on petrol. Only a tiny part of the overall price of petrol in the UK is accounted for by the cost of the oil itself. A full three quarters of what the UK consumer has to pay is going to the taxman.

In spite of that, Europe's politicians continue to try to blame the oil producers. "The sensible way, indeed the only right way [to lower petrol prices], is to put OPEC under pressure, not to let it off the hook by caving in to pressure," said Tony Blair, the British Prime Minister.

His and other leaders' protestations that all this is beyond their control, however, isn't washing with Europe's public. Angry protesters blocked oil refineries and stations in France last week, bringing everyday working life to a virtual halt. Inspired by French disobedience, the normally well behaved British followed suit.

Oil refineries and terminals were blockaded all over the country whilst lorry drivers staged 'go slow' protests on busy roads. Whilst mild by France's militant standards, such scenes of protest hadn't been seen in Britain since Margaret Thatcher's heyday.

The French government backed down, lowering petrol and diesel duties for workers in certain industries. The UK government held firm, however, until protesters eventually began to disperse today, feeling they'd made their point.

Whilst continuing to shrug off the criticisms aimed at it, OPEC did take action. At a September 10 OPEC meeting, member countries agreed to a production increase of 800,000 barrels per day, taking daily production up to 26.2 million barrels.

OPEC's official line is that it wants oil prices to eventually settle in the high twenties, at around $28 per barrel. "The price is heading in the right direction,'' said Saudi Arabia's oil minister, Ali Al-Naimi. "The price needs to come to $30 in order to take the pressure off.''

Despite those comments, oil prices changed little in the few days following the news, staying above the $30 mark. Some members of OPEC, which normally deals politely with criticisms over its output controls, suggested that Western consumers should direct their criticisms elsewhere. "We want consumer nations to work to reduce taxes," said Qatar's oil minister, Abdullah bin Hamad Al Attiyah.

Most commentators agree with him. The UK's Guardian newspaper, normally a good friend of Prime Minister Tony Blair, was clear about who it blamed. "The cost of oil makes up only a proportion of the price that British drivers pay for their petrol," the newspaper wrote. "Most of the bill is down to tax — and it's tax increases which really seem to have pushed up prices in the last few years."

Taxes have been going up in the UK because the government uses a method called the 'fuel price escalator' to push up the duty on petrol ahead of inflation rises each year. The device is designed to discourage car usage and help the environment. Germany, where the Green Party shares power, has taken similar measures, with an environmental tax on petroleum.

With the Winter approaching in the Western world, concerns over oil prices will remain high. All eyes are now on whether or not OPEC will raise output to meet increased seasonal demand. If it doesn't, expect OPEC to face another, intensified barrage of criticism.

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