Rhein on Energy and Climate

Gasoline and fuel prices have reached their highest level since the summer of 2007 when the oil price had peaked at $ 147/barrel. American consumers suffer more from the hike than Europeans, who are shielded by the revaluation of the Euro and high excise taxes softening the repercussions on fuel/gasoline prices. But US drivers having to pay € 0.9/litre and ride fuel-inefficient cars definitely feel the crunch.

The world market price will not remain beyond $ 110/barrel. It will fall back again to some $ 70-90 as soon as the political insecurity in the Arab world will have passed. From a climate perspective a world market price vacillating around $ 100/barrel would be preferable.

A higher oil price would have two long-term consequences:

  • Consumers would go for smaller fuel-efficient vehicles.
  • Manufacturers would accelerate the race towards low-consumption vehicles.

For this to happen consumers and manufacturers must be pretty sure that oil prices will stay at higher levels than in the past.

It would be very helpful if OPEC were to stabilise the oil price around $ 100/barrel rather than the present price target of only around $ 80. They have the means to do so. They should by the same token announce their price targets and enhance the level of transparency in a market that has been upset by rapid fluctuations.

Independently of whatever OPEC action, consumer countries should draw the right consequences from the recurrent “oil crises.”

  • Those countries that do not impose excise taxes on fuels and gasoline should introduce them after the oil will have declined again to its “normal” level.

This goes in particular for the USA! A federal excise tax on gasoline would produce at least three advantages : reduce the unsustainable budget deficit, enhance security of supply and help fight climate change.

Their stubborn refusal to act on the tax front is incomprehensible.

  • European countries that have not imposed speed limits on highways should rapidly do so. Spain has temporarily lowered its speed limit from 120km/h to only 110 km/h. This will make it even more attractive to switch to high-speed trains for travel between the main cities.
  • Germany remains the only big European country without a generalised speed limit on its highways. This is an anomaly owed to the the lobby power of its automobile industry. The next German government should put an end to it and fix a speed limit of no more than 130 km/h, like in France Whoever drives in both countries will find the French traffic much more relaxed and discover that the fuel consumption is about 10 percent lower than on German highways, due to the lower and more regular speed.
  • Higher gasoline taxes and lower speed limits should go along with attractive subsidies and network improvements of public commuter transport.

That is what the Spanish government is currently trying to do. But no other European government has dared to define a strategy for de-congesting the fuel-wasting daily queues of commuters in European metropolitan areas.

It is high time to do so.

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