High gas taxes multiply pump pain in Europe

LONDON – David Graham pulled up to the gas pump in his shiny black Jeep SUV with a “for sale” sign taped in the window.

Graham, 48, a London building contractor, pointed at the price on the pump – the equivalent of $6.62 a gallon, which means it costs him $125 to fill his tank. “That’s why this is for sale,” Graham said. “I can’t afford it anymore. I have to walk everywhere. Things have gone mad.”

As Americans contemplate the misery of a summer of $3-per-gallon gas, drivers in Britain and much of Europe look on with a resigned jealousy. Taxes and rising crude oil prices have created some of the world’s most expensive gasoline on this side of the Atlantic, where a family car is deemed more of a luxury than a necessity and many people rely instead on extensive public transportation networks.

But even in Europe, where consumers have long been paying pump prices double – or more – those paid by Americans, there is growing alarm over climbing fuel costs.

Many motorists are driving less and altering their daily habits for shopping, vacations and other routines, according to interviews and opinion polls. Many airlines, delivery services and other fuel-dependent businesses are passing increases on to consumers through higher prices or taking deep profit cuts.

Andris Piebalgs, the European Union’s energy commissioner, warned last weekend that high oil prices were “destroying economic growth” in Europe.

Kate Gibbs of Britain’s Road Haulage Association, which represents truckers and trucking companies, said the prices are driving many small trucking companies out of business. “They just can’t take it anymore,” Gibbs said.

Drivers in 11 European countries are now paying an average of more than $6 a gallon, according to Britain’s AA Motoring Trust. “We have always looked upon you Americans with a lot of envy” about gas prices, said David Williams of the trust, an independent research group that advocates for British motorists.

European governments have long used gasoline taxes not only as an important source of revenue, but as a policy tool to drive down oil consumption and reduce pollution.

Williams said taxes account for about 66 percent of the pump price in Britain – so of this month’s average price per gallon of $6.40, about $4.22 goes to the government.

U.S. drivers pay an average of about 46 cents per gallon in combined state, federal and local taxes, according to the Tax Foundation, an independent organization in Washington.

“We would like to see zero fuel duties, of course,” Williams said. “But we have to put our hands on our hearts and admit that the government needs money for all kinds of things, and this is one way to get it. People do want their schools and hospitals to be better, so this is just practical politics.”

Six years ago, when government taxes were an even larger share of fuel costs, truckers, taxi drivers and other protesters blockaded Britain’s oil refineries and storage depots to stop delivery to gas stations. The week-long strike nearly paralyzed the country.

British government officials said that in order to lessen the pain to consumers, they have frozen the primary tax on gasoline since 2003. It has remained at 47.1 pence per liter – about $3.19 per gallon at today’s exchange rates. On top of that duty, consumers also pay a 17.5 percent consumption tax.

In his 2006 budget announced last month, Gordon Brown, Britain’s finance minister, continued the freeze until at least September.

In the Netherlands, gas is selling for about $6.16 per gallon, which includes $3.10 in duty and 19 percent sales tax, said Jelle Wils, spokesman for the Ministry of Economic Affairs. Wils said the government has had “heavy discussions” about tax cuts or other relief measures for consumers but decided not to interfere with market forces.

“We cannot do anything about these prices because they are market prices,” Wils said.

But consumer anger is clearly on the rise. “It’s extortion, ” said Alan Pirrie, 54, an industrial cleaner who lives near Coventry and drives 100 miles to London and 100 miles home six days a week – 1,200 miles a week.

Pirrie said it costs him almost $120 to fill the tank of his small Fiat van, and he has to fill up three times a week. “Of course they should cut the tax, but there’s no chance,” said Pirrie, who said he and other drivers expect prices to continue rising. “It’s life.”

The average gasoline price in Britain has risen 19 percent since January 2005. Many stations are charging well above the $6.40 national average; at least one in London’s chic Chelsea neighborhood was charging nearly $8 a gallon last weekend.

“It’s disgusting,” said Elizabeth Jones, 50, a pharmacy assistant, who was pumping $40 worth of gas – for half a tank – into her little Ford Fiesta in a working-class neighborhood in west London.

Jones said she now takes the bus to the grocery store instead of driving. She and her husband sold their second car because they couldn’t afford to fill two tanks.

Alan Skitt, driving a small Renault Kangaroo van in Poplar, a modest neighborhood in east London, called the price increases “awful.” He blamed them on President Bush for starting the Iraq war, which he contends contributed significantly to volatility in oil price.