High Gas Prices Are Chance to Cut Reliance on Oil

by Danielle Knight

Oil prices climbed to as high as $35.39 per barrel for some blends on Sept. 11, the highest since 1990, and industry analysts do not expect a significant drop anytime soon. In response, protests have blossomed across Europe, where taxes on petrol are relatively high.

Last week, French cab and truck drivers brought cities to a standstill in a protest over fuel prices. More than 50 percent of the gasoline stations across Britain were forced to close yesterday as groups of protesters blockaded oil refineries and cut off fuel deliveries. Groups in Germany, Belgium, Ireland, and the Netherlands, emboldened by these actions, have mounted their own campaigns.

The world's reliance on fossil fuels will be tackled this week in Lyon, the French city which was stricken by blockades of truck drivers protesting the hike in petrol prices.

The preliminary meeting is to prepare for a conference in The Hague in November at which ministers will hammer out the details of the Kyoto Protocol, the international accord on climate change that sets legally binding limits on heat-trapping greenhouse gas emissions.

Scientific pleas to break the political deadlock on the climate negotiations have increased since last month when an ice breaker cruise ship encountered, for the first time, open water at the North Pole, indicating to many that the Earth's climate is indeed warming.

Since international oil prices have gone up, the public has been highlighting various government "green taxes" on petrol, which account for a large percentage of the high price of petrol in the European Union.

Environmental groups expressed dismay when some European governments began to steer away from taxes on petrol in the face of this public outcry. Friends of the Earth France has accused the French government of giving into public pressure and changing its stance on climate change when it promised a reduction in fuel taxes to protesters last week.

In Germany, the Christian Democrats have called for a repeal of the government's "mistaken concept of ecological taxes." British Prime Minister Tony Blair, meanwhile, has said he will not capitulate to public pressure by lowering the fuel tax.

According to Lester Brown, founder of the Worldwatch Institute here, the solution to high petrol prices and global warming can be one and the same.

He argues that the answer to both conundrums lie not in reducing taxes on petrol, but in fundamentally restructuring government tax systems in order to begin moving away from reliance on fossil-fuels.

"The time has come to restructure government tax systems to reduce the threat of soaring oil prices and to stabilize climate change," he says.

He argues for lowering personal income tax and offsetting it with taxes on gasoline.

The Organization of Petroleum Exporting Countries (OPEC) knows, says Brown, that the cost of producing oil in Saudi Arabia, with the lion's share of world oil reserves, is about $2 dollars a barrel. The oil cartel also knows that if petroleum prices climb too high, there will be a global recession, which is hardly in its interest.

Yet, if there is a world price for petroleum products beyond which a further rise would be disruptive, then the issue is who gets the difference between the low production cost of oil and this much higher market price, says Brown.

"If importing countries push prices of gasoline, fuel oil, jet fuel ,and other oil products close to that limit by imposing stiff taxes, then the potential for raising prices by OPEC is lessened," he argues.

Brown's theory is bolstered by the fact that in a meeting with President Bill Clinton in New York last week, Saudi Crown Prince Abdullah urged importing countries to lower their taxes on gasoline and other oil products.

"If we take the initiative and raise gasoline taxes while lowering income taxes, the increase in the gasoline tax will end up in our treasury and individuals will benefit from lower income taxes," says Brown.

And if we do not restructure and the price of fuel keeps increasing?

"We will eventually pay the same higher price for gasoline," explains Brown, "but not get the income reduction."

The revenue generated from the taxes on gasoline could go to encouraging development of renewable energy sources, such as wind and solar power, he argues.

Many countries, and corporations, are beginning to move beyond oil and coal toward energy sources that do not harm the environment. Worldwide, wind power generation grew by 24 percent per year, solar cell production by 17 percent and geothermal power by four percent.

Denmark now gets 10 percent of its electricity from wind. For the industrial province of Navarra in Spain, it is 22 percent.

Even oil companies are talking about shifting from carbon-based to a solar/hydrogen-based energy economy. British Petroleum is now the world's leading manufacturer of solar cells.

By contrast, world oil use expanded at one percent a year and coal use actually declined by nearly 1 percent.