Rhein on Energy and Climate

Gasoline prices in Europe went up by about a quarter during the first half of 2008, to a peak of around € 1.50 in late July, a normal consequence of the spectacular rise of oil prices.

For a short time, gas prices became the dominant concern of car owners, no longer able to pay for their daily trips to work, let alone for distant holiday destinations. Spontaneous protests erupted and over-eager politicians pleaded for a reduction of excise taxes or VAT.

Since then, international oil prices have declined by a third from their peak level of $ 147/baril; so have the gasoline prices and the rattle about “intolerable prices”.

Nobody has yet analysed in detail why oil prices have shot up and down so much in such a short time span. Never before has Humanity witnessed a similar price fluctuation for a vital commodity.

One reason behind the decline of oil prices has been the response from consumers. They have reacted by using their car less often, driving more slowly and switching to public transportation. And the automobile industry had to put up with a steep decline of their sales, especially of vehicles with high gas consumption.

Available statistics for petrol consumption offer the quantitative evidence. Thus, in August 2008, German gasoline consumption was 7 percent lower than in August 2007! That is a huge decline. French, US and other statistics supply similar evidence.

What lessons to draw?

Consumers react to changing gasoline – energy – prices, even it takes a doubling of prices for consumers to reduce their consumption by 10 -20 percent.

The steep rise of gasoline prices and the perception that high prices are there to stay has finally convinced industry of the need to develop and sell energy-efficient automobiles.

Industry has too long believed that it can sell four-wheel drives and all sorts of gas-devouring limousines. This summer it had to learn its lesson the hard way, especially in the USA, bringing companies to the verge of bankruptcy. Small, energy-efficient cars, consuming less than 6 l /100 km are “in”. Finished the SUVs!

Before the end of the year, the EU will have passed its overdue and highly controversial fuel-efficiency legislation, imposing upon the EU automobile industry strict standards for C02 emissions, 120 g/km as of 2014 and hopefully <100 g/km as of 2020.

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  1. I also recocgnised that consumers became price-sensitive and I think this make a good case for a carbon tax. It looks that the oil prices made their impact on consumption pattern. The winter will show how European react on natural gas prices. Although adjusting heating is much more difficult so I expect a lot of call for state subsidies.

    Price rise case for carbon tax

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