French chaos as fuel tax blockades spread

Jon Henley in Paris

Friday September 8, 2000

The Guardian

France’s fuel tax standoff escalated further yesterday as serious fissures began to appear in the ruling coalition and the European commission threatened legal action to maintain the free movement of goods.

With some 80% of the country’s petrol stations either empty, under tight rationing or reserved for the emergency services, taxi drivers became the latest group to join the campaign for fuel tax cuts, causing traffic chaos in more than a dozen cities with massed “go-slow” protests.

Farmers declared there was no prospect of them withdrawing from the barricades they are helping road hauliers to man outside 125 oil refineries and fuel depots around France.

Dodging riot police, several hundred farmers succeeded in blocking the entrance to the Channel tunnel at Calais late yesterday afternoon, leading to angry confrontations with motorists. The blockade was later temporarily lifted to allow furious British holidaymakers on to the shuttle.

Other farmers drove tractors and trailers on to train tracks outside Strasbourg and Bordeaux, brining high-speed TGVs in the east and west to a standstill for most of the day.

Nantes, Nice and Rennes airports reported they had all but run out of aviation fuel, school meals went undelivered in the Vosges, emergency-only petrol stations went dry in Brittany, and police were called in to guard requisitioned pumps in Lyons.

For the first time in the four-day blockade, the French capital began to feel the pinch. While surrounding fuel depots were largely kept open by armed riot police, Paris petrol stations began to run out of fuel, particularly diesel, in increasing numbers.

Furious at the fuel tax cuts already offered to the road hauliers, the Green party, a minority member of the Socialistled coalition, warned the prime minister, Lionel Jospin, that it would react “forcefully” if any more concessions were made to road users.

“I back the cabinet that I am a member of, but I want to remind everyone that I joined it on the understanding that we would work for clean air and for moving away from road to rail transport,” said the environment minister, Dominique Voynet.

She had demanded an urgent meeting with Mr Jospin and said the Greens “were not in this government in order to do the exact opposite of what we were elected to do”.

Mr Jospin said on Wednesday night there would be no further negotiations with the hauliers and the government’s offer was final.

In Brussels, the European commission sent a formal request to Paris “concerning a possible obstacle to the free movement of goods”, spokesman Jonathan Todd said. France would be violating EU law if it did not ensure its frontiers and main routes were kept open to goods traffic, he said.

How Opec came back to haunt the west

Record demand and tighter supply have sent oil prices soaring but, unlike in the 70s, the producers may back down

Brian Whitaker and Larry Elliott

Friday September 8, 2000

The Guardian

Bill Clinton’s message to crown prince Abdullah of Saudi Arabia was brief and to the point when they met yesterday. Unless the world’s biggest oil producer shook some sense into the militant members of the Opec cartel, there was a risk of plunging the world economy into recession.

This week’s Millennium Summit in New York has been the ideal time for some diplomatic arm-twisting, and the outgoing US president has taken full opportunity of the presence of 189 world leaders to spell out to the Saudis the consequences of turning up the heat on the big industrialized economics.

With rising energy costs casting a shadow over Al Gore’s election hopes, halting the relentless rise in the oil price to its highest level in 10 years has become a key policy objective in Washington. Nor did Mr Clinton need to look very far for a world leader to support him. Jacques Chirac was also at the United Nations summit to give a first-hand account of how France is grinding to a halt as a result of the protests at rising petrol prices.

After years in the doldrums, Opec has now grabbed centre-stage once more. It is 27 years since the 11-nation cartel first came to public notice when its response to Israeli victories in the Yom Kippur war was to increase oil prices fivefold, triggering a period of stagflation – rising prices and lengthening dole queues – in the west.

Over the past 18 months it has again been flexing its muscles, agreeing to curb production as world demand for oil rises. As motorists have found to their cost, the result has been a sharp increase in petrol prices at the pump.

Prince Abdullah probably did not take much persuading at his meeting with Mr Clinton. The Saudis are well aware that a downturn in the west could cause a collapse in the oil price. Even so, they are likely to get some flak from other Opec members at the cartel’s meeting in Vienna on Sunday, who say that the oil producers are being unfairly criticized for a problem caused by higher fuel taxes and refinery bottlenecks in the west.

A chart on its website headed “The rip-off race” cheekily compares the prices of a barrel of oil, a barrel of Coca Cola and a barrel of Perrier water. Needless to say, it shows that oil is a bargain, though perhaps less thirst-quenching.

Today, Opec has more muscle than ever before – at least in theory. Its share of worldwide production has increased from 36% to 42% over the last 10 years, and its share of proven reserves has increased from 67% to 78%. This trend, in the view of some analysts, is likely to continue.

But Opec’s ability to use this muscle is limited because its members – Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela – have divergent interests and its decisions have to be based on consensus.

Oil-producing countries range from those which can barely produce enough for their own needs to those which are almost totally dependent on oil for their foreign exchange earnings.

Dependent

The most dependent countries benefit from high prices but also need price stability. Drastic changes, up or down, hamper longer-term development and can mean re-drafting the national budget at short notice. Besides the Opec countries, Russia, Kazakhstan, Azerbaijan, Yemen, Oman and Mexico fall into this category.

Julian Lee, almost at the London-based Centre for Global Energy Studies, said yesterday that Sunday’s discussions will not be about whether a production increase is needed, but by how much.

“It is all but certain that the situation will trigger an increase of 500,000 barrels a day, which will be fairly generally accepted,” he said. “But Saudi Arabia will push for a bigger increase – because it sees this as being in its own long-term interests and those of Opec generally.”

The Saudis are well-placed to do this because they hold about two-thirds of Opec’s spare capacity which is estimated at 3m barrels a day. The Saudis would to some extent be shielded from a fall in oil prices by revenue from their extra production.

But other Opec countries – Algeria, Iran, Libya, Nigeria and Venezuela – would lose money as a result of lower prices because they have little spare capacity.

Venezuela, which currently holds the presidency of Opec, is at the forfront of the reluctant faction. At 3.1m barrels a day it is Latin America’s largest producer – but almost totally dependent on oil. Each $1 drop in oil prices costs it about $1bn (J665m) a year.

Its charismatic president, Hugo Chavez, has called an Opec summit in Caracas for later this month, and argues that the real issue is not high prices, but fair prices.

“We understand that they [consumers] start to feel uneasy when crude oil prices reach $30 a barrel, but they can imagine how it must have been for us when it fell to $8,” he said recently.

Coming at a critical moment in the Middle East peace process and in the midst of an American presidential election campaign, the argument over oil prices has acquired a political dimension.

The Americans have been shouting more loudly than usual, and the perception that this was motivated, at least in part, by the electoral needs of the Democrats caused some resentment.

Since then, the issue has been further complicated by American efforts to drum up support for its proposals on the Israeli-Palestinian issue. On the thorny question of Jerusalem, the Arab governments generally view the US as oversympathetic towards Israel. This is not a particularly good moment for Arab governments to be seen kow-towing to the Americans.

Any decision to increase production will also have a built-in assumption that existing supplies will continue unabated. But with low stockpiles around the world, consumers have no real cushion against disruption of supplies from less dependable sources such as Iraq, Nigeria, Colombia and Angola.

Clinton wins oil pledge

Saudis to raise production as revolt on prices brings France to a halt