Record gas prices pummel world's drivers

The Associated Press
Published Saturday, May 31, 2008

PARIS -- Americans are shell-shocked at $4-a-gallon gas. But consider France, where a gallon of petrol runs nearly $10. Or Turkey, where it's more than $11.

Drivers around the world are being pummeled by the effects of record gas prices. And now some are hitting back, staging strikes and protests from Europe to Indonesia to demand that governments do more to ease the pain.

It's a growing problem in a world that's increasingly mobile and more vulnerable than ever to the cost of crude oil, which is racing higher by the day and showing no signs of stopping.

"I don't know why it is, but ... it hurts," said Marie Penucci, a violinist who was filling up her Volkswagen to the tune of $9.66 a gallon at an Esso station on the bypass that rings Paris.

As she pumped, she looked wistfully at a commuter climbing onto one of the city's cheap rental bicycles, an option not open to her since she travels long distances to perform.

As oil soars, the effect on drivers can vary widely. Taxes and subsidies that differ from nation to nation are the main reasons, along with limits in oil refining capacity and hard-to-reach places that drive up shipping costs.

In Europe and Japan, for example, high taxes have made drivers accustomed to staggering gas prices. As a result, plenty of European adults never even bother to learn to drive, preferring cheap mass transit to getting behind the wheel.

Those who do drive are still testing new pain thresholds. And it would be worse in Europe if the strong euro weren't cushioning the blow.

On the other hand, in emerging economies such as China and India, government subsidies shield consumers. But that still means governments themselves have to find a way to afford the soaring market prices for oil.

Increasingly, people around the world are reaching the boiling point -- and it's not just drivers.

Fishermen in Spain and Portugal began nationwide strikes Friday, keeping their trawlers and commercial boats docked at ports. In Madrid, demonstrators handed out 20 tons of fish in a bid to win support from the public.

In Spain, the European Union's most important producer of fish, the fishing confederation estimates fuel prices have gone up 320 percent in the past five years -- so high many fishermen can no longer afford to take their boats out.

French fishermen and farmers, who need fuel for 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.

British and Bulgarian truckers are staging fuel protests, too.

Indonesians are staging their own protests against shrinking gasoline subsidies in a nation where nearly half the population of 235 million lives on less than $2 a day.

The world is driving more than ever: There are 887 million vehicles in the world, up from 553 million just 15 years ago, according to London consultancy Global Insight. It estimates the figure will be 1 billion four years from now.

In Europe, the high tax burden means crude prices make up a smaller part of the retail cost of gas.

"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 -- closely linked to the price of oil.

So as oil prices have soared, U.S. gas prices have soared along with them.

Prices for regular unleaded gas have risen from $1.47 a gallon in May 2003 to more than $3.96 now, a jump of nearly 170 percent. In the same period, the most popular grade of gas in France rose by just over 90 percent -- a relatively gentle climb.

Americans are driving less -- about 11 billion fewer miles in March 2008 than March 2007, a drop of about 4 percent, according to the Schork Report newsletter. It was the first drop in March driving in almost three decades.

In the U.S., presidential candidates John McCain and Hillary Rodham Clinton have proposed suspending the federal gas tax for the summer to give drives some help, although it is not clear whether drivers would actually see much relief.

French President Nicolas Sarkozy has urged the EU to cut its value-added tax on fuel.

Nations that produce huge amounts of oil aren't necessarily in better shape.

Russia is the world's second leading producer of oil, but gas there comes to about $3.68 a gallon -- about the same as in the United States, where workers earn about six times as much money.

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. It costs $11.29 a gallon there, meaning filling up the tank of a midsize car can reach nearly $200 -- enough to give up on driving and buy a domestic plane ticket.

It's not that bad everywhere.

In China, government-mandated low retail gas prices have helped farmers and China's urban poor but, in a country struggling with pollution, also have hurt conservation. The Chinese used about 5 percent more gas in the first four months of this year than last.

And in Venezuela, long-held government subsidies and bountiful supplies have made the people think of cheap fuel as a birthright. It's a veritable wonderland for gas guzzlers -- 12 cents a gallon. Consumers there are snapping up SUVs.

For solutions to the oil crisis, policymakers in less oil-rich nations are looking to Brazil, where ethanol made from sugar cane is widely available to the nation's 190 million people.

Eight out of every 10 new cars sold there are flex-fuel models that run on pure ethanol, gas or any combination of the two. Ethanol in Sao Paulo is running about half the price of gas, which is $5.67 per gallon.

But those examples are definitely the exception.

"It's been tough. I had to switch to regular gasoline from premium class," said Hiroyuki Kashiwabara, a Japanese worker whose monthly spending on gasoline has increased by nearly $100 over the last couple of months alone. "My salary doesn't change and I can't cut back on my spending on food or anything else."

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

His answer? To rich 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.