French premier seeks to ease oil fears
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By Martin Arnold in Paris Published: August 17 2005 03:00 Last updated: August 17 2005 03:00
Dominique de Villepin, French prime minister, has moved to ease public concern over high oil prices by pledging to return any fuel tax windfall in this year's budget to low-paid workers and the hardest-hit sectors of the economy.
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Yesterday, alongside four cabinet colleagues recalled from holiday, the prime minister announced a review of French energy policy to adapt to high oil prices, which he warned would "remain expensive for years and decades to come".
He urged oil companies, including French group Total, to invest in French refining capacity to address diesel shortages. "It is up to Total and other oil companies, which make large profits, to quickly make this investment effort."
The speech, sprinkled with promises to increase fiscal incentives for renewable energy, shows Mr de Villepin wants to show his sensitivity to public worries about high fuel prices. But the modesty of the proposals reflects his limited room for manoeuvre, faced with a sluggish economy, a yawning public deficit and debts of more than €1,000bn ($1,234bn, £683bn).
He asked French motorists to "show a spirit of responsibility" by cutting their average speed by 10km per hour, which he said would save them €140 a year and reduce national petrol consumption by 1.5m metric tonnes.
Mr de Villepin rejected calls from opposition Socialists and road haulage groups to reintroduce a variable tax on petrol sales, a measure designed to limit the impact of high oil prices on consumers. The variable fuel duty mechanism was introduced in 2000 by the previous Socialist government of Lionel Jospin, but was abolished a year later.
Thierry Breton, finance minister, said it was "extremely premature" to consider a return to the variable fuel duty mechanism, which he said was ineffective, as €400m spent by the state would cut prices by only 1 centime (euro cent) per litre at the petrol pump.
The government had budgeted for an oil price at $36 a barrel this year. Mr Breton expected to budget for a price of "closer to $50 a barrel" in next year's budget. The price of Brent crude was $65.55 a barrel yesterday.
The finance minister gave a bullish assessment of the economy, in spite of a slowdown in the second quarter to gross domestic product growth of only 0.1 per cent. "In the first two months of the second quarter we hit an air pocket. But June saw an improvement that was confirmed in figures for July. We clearly feel the worst is behind us, in terms of company creation, industrial production or business sentiment," he said.
Mr de Villepin, who promised after taking office in June to restore confidence to the French people within 100 days, will present a plan to relaunch growth next month.
By Martin Arnold in Paris Published: August 17 2005 03:00 Last updated: August 17 2005 03:00
Dominique de Villepin, French prime minister, has moved to ease public concern over high oil prices by pledging to return any fuel tax windfall in this year's budget to low-paid workers and the hardest-hit sectors of the economy.
//
Yesterday, alongside four cabinet colleagues recalled from holiday, the prime minister announced a review of French energy policy to adapt to high oil prices, which he warned would "remain expensive for years and decades to come".
He urged oil companies, including French group Total, to invest in French refining capacity to address diesel shortages. "It is up to Total and other oil companies, which make large profits, to quickly make this investment effort."
The speech, sprinkled with promises to increase fiscal incentives for renewable energy, shows Mr de Villepin wants to show his sensitivity to public worries about high fuel prices. But the modesty of the proposals reflects his limited room for manoeuvre, faced with a sluggish economy, a yawning public deficit and debts of more than €1,000bn ($1,234bn, £683bn).
He asked French motorists to "show a spirit of responsibility" by cutting their average speed by 10km per hour, which he said would save them €140 a year and reduce national petrol consumption by 1.5m metric tonnes.
Mr de Villepin rejected calls from opposition Socialists and road haulage groups to reintroduce a variable tax on petrol sales, a measure designed to limit the impact of high oil prices on consumers. The variable fuel duty mechanism was introduced in 2000 by the previous Socialist government of Lionel Jospin, but was abolished a year later.
Thierry Breton, finance minister, said it was "extremely premature" to consider a return to the variable fuel duty mechanism, which he said was ineffective, as €400m spent by the state would cut prices by only 1 centime (euro cent) per litre at the petrol pump.
The government had budgeted for an oil price at $36 a barrel this year. Mr Breton expected to budget for a price of "closer to $50 a barrel" in next year's budget. The price of Brent crude was $65.55 a barrel yesterday.
The finance minister gave a bullish assessment of the economy, in spite of a slowdown in the second quarter to gross domestic product growth of only 0.1 per cent. "In the first two months of the second quarter we hit an air pocket. But June saw an improvement that was confirmed in figures for July. We clearly feel the worst is behind us, in terms of company creation, industrial production or business sentiment," he said.
Mr de Villepin, who promised after taking office in June to restore confidence to the French people within 100 days, will present a plan to relaunch growth next month.
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