French govt, oil industry agree to cut fuel prices

PARIS: The French government and energy industry have agreed to cut fuel prices by up to 6-euro cents per liter for three months to help drivers hit by a recent increase in prices, Finance Minister Pierre Moscovici said yesterday.
He said the burden of the “extremely substantial” cut would be shared equally between the French state, oil companies and supermarket chains such as Carrefour, with each contributing 3-euro cents per liter.
“This means it will cost 1.50-euro less to put 25 liters in the fuel tank. It's a substantial amount, especially for people with low revenues or who have to drive a lot,” Moscovici told a news conference after talks with industry representatives.
The decision, which will take effect in the next 24 hours, will cost the state at least 300 million euros ($375 million) in lost tax revenues for the period, he said.
“It's a very unintelligent measure. The government did rather well in its negotiations with the oil industry. But it's still a big expense for the government with a marginal impact for drivers,” Jean Sivardiere, head of the FNAUT consumer association, told Reuters.
“It also sends a terrible signal to the French. It's like telling them 'don't worry, the government is taking care of you' while it should say 'oil prices will continue to rise, so change your habits',” Sivardiere added.
Taxes make up about half of the price drivers pay at the pump in France. Based on last week's average pump prices, a 6 cent per liter cut would amount to a total 3.6 percent price cut for unleaded fuel and 4.1 percent for gasoil, the most common car fuel in France.
According to the UFIP oil industry lobby, a one euro cent per liter cut in fuel tax costs the state 125 million euros per quarter.
Total supply and marketing chief Philippe Boisseau said the oil company would cut fuel prices in France by 2-euro cents per liter and 3 cents at motorway fuel stations.
Boisseau said he did not have an estimate ready for the discount's overall cost for the oil major.
“The measure is limited in time. During this time we won't make any money so it can't last longer,” he added.
With dwindling purchasing power frequently ranked in polls as a top concern for the French, President Francois Hollande pledged before his election in May to freeze surging retail fuel prices for three months.
When he took office Hollande found that immediate action was not warranted due to easing prices, although a recent increase has since forced Moscovici to act on the pledge.
Moscovici said the price cut would be reviewed at the end of the three months.
In 2011, the main TICPE fuel tax brought in some 14 billion euros in revenue to the French government, which is struggling to cut its deficit to 3 percent of gross domestic product next year from 4.5 percent in 2012 despite a stagnating economy.