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High gas prices hit consumers worldwide

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[May 31, 2008]  PARIS (AP) -- Feeling woozy about the fortune you've just pumped into your gas tank? Drivers around the world share the sensation.

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HardwareConsumers, gas retailers and governments are wrestling with a new energy order, where rising oil prices play a larger role than ever in the daily lives of increasingly mobile people. But as the cost of crude mounts, the effect on the price at the pump varies startlingly - from Venezuela, where gas is cheaper than water, to Turkey, where a full tank can cost more than a domestic plane ticket.

Taxes and subsidies are the main reasons for the differences, along with lesser factors such as limited oil refining capacity and hard-to-reach geography that push up prices.

"I don't know why it is but... it hurts," says Marie Penucci, a violinist filling up her Volkswagen at an Esso station on the bypass that rings Paris.

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As she pumped gas worth $9.66 a gallon she looked wistfully at a commuter climbing onto one of the city's cheap rent-a-bikes, an option not open to her since she travels long distances to perform.

High taxes in Europe and Japan have long accustomed consumers to staggering pump prices, which now are testing new pain thresholds - and it could have been even worse, if a strong euro hadn't cushioned some of the blow. As a result, plenty of European adults never even bother to learn to drive, preferring cheap mass transit to cumbersome cars.

Subsidies in emerging economies such as China and India, meanwhile, shield consumers but hurt governments, which must find a way to afford rising market prices for oil.

Increasingly, they can't. Indonesians are staging protests against shrinking gasoline subsidies in a nation where nearly half the population of 235 million lives on less than $2 a day. And there are now 887 million vehicles in the world, up from 553 million vehicles just 15 years ago, and on track to nearly double to a billion by 2012, according to London-based consultancy Global Insight.

In Europe, taxes are often the focus, since the high tax burden means crude itself is a smaller part of the burden.


"The pain of a rise in prices is much less in Europe, because we may be paying a lot more here, but the rise in a percentage sense is a lot smaller," said Julius Walker, oil analyst at the Paris-based International Energy Agency.

The United States, with its relatively low taxes, is considered to have retail prices closer to what energy data charts call the "real cost" of gasoline - which is closely linked to the price of oil.

So as oil prices have soared, average U.S. prices have gone up 144 percent in the past five years - from $1.67 in May 2003 to $4.02 a gallon this month, according to the U.S. Energy Information Administration. Over the same period, gas prices in France went up 117 percent to $9.66 a gallon.

Proposals by U.S. presidential candidates John McCain and Hillary Clinton to suspend federal gas taxes this summer would lower the price tag - but have little effect on the underlying oil price. French President Nicholas Sarkozy has urged the EU to cut value-added tax on fuel.

French fishermen and farmers, who need fuel for their trawlers and tractors, say their livelihoods are threatened by soaring prices and have blocked oil terminals around France and shipping traffic on the English Channel to demand government help. Italian, Portuguese and Spanish fisherman joined them and went on strike Friday. British and Bulgarian truckers are staging fuel protests, too.

Russia is proof that big oil-producing nations are not in any better shape when it comes to gasoline prices. Gas in the world's No. 2 oil producer runs about $3.68 a gallon - nearly that in the United States, where the average wage is about six times higher.

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Much of the Russian cost comes from taxes, which run between 60 and 70 percent. Limited refining capacity and the costs of transporting gasoline across the country's vast expanse also push up prices.

Turkey faces similar problems - and even higher prices - $11.29 a gallon, which for a full tank in a midsize car can reach nearly $200, enough for a domestic plane ticket.

In China, government-mandated low retail gasoline prices have helped farmers and China's urban poor but also have hurt conservation. In the first four months of 2008, gasoline consumption was up 5.5 percent from the same period last year.

Venezuela, too, is a gas-guzzler's wonderland. A gallon costs just 12 cents and consumers are snapping up SUVs even as Americans are shunning them. Thanks to long-held government subsidies and plenty of oil, Venezuelans see cheap fuel as a birthright.


Some policymakers in less oil-flush nations look to Brazil's use of ethanol as a potential solution. Ethanol from sugarcane is widely available in the world's No. 1 sugar producer and its 190 million people. Eight out of every 10 new cars sold are flex-fuel models that run on pure ethanol, gas or any combination of the two. The price for ethanol in Sao Paulo is currently running about half the price of gas, which runs $5.67 per gallon.

In Japan, gas station owners say some customers aren't filling up their tanks all the way.

"It's been tough. I had to switch to regular gasoline from premium class," said Hiroyuki Kashiwabara, a company employee in his 50s whose monthly spending on gasoline has increased by nearly 10,000 yen ($96) over the last couple of months. "My salary doesn't change and I can't cut back on my spending on food or anything else."

Americans, too, are beginning to trim their hearty gas appetites.

"We're beginning to see a slowdown in the U.S. in gasoline demand in particular. That's not so visible in other parts of the world," the IEA's Walker said.

Jean-Marc Jancovici, a French engineer and co-author of a philosophical treatise called "Fill It Up, Please!" despairs rising thirst in the developing world for shrinking oil resources.


"The real question is ... how to save peace and democracy in this context," he asks.

His answer? To rich-country consumers, at least, he says: Pick up your bike and "stop being petroleum slaves."


Associated Press writers David Nowak in Moscow; Robin McDowell in Jakarta, Indonesia; Ian James in Caracas, Venezuela; Alan Clendenning in Brasilia, Brazil; Joe McDonald in Beijing; Mari Yamaguchi and Shino Yuasa in Tokyo; Ashok Sharma in New Delhi; and Franziska Scheven and A.J. Goldmann in Berlin contributed to this report.

[Associated Press; By ANGELA CHARLTON]

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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