As the war in the Middle East drives up prices of petrol and gas, France wants to use additional tax revenue generated to fund the country’s move away from fossil fuels – but some analysts say any extra returns are offset by rising costs and inflation.
Issued on:
3 min Reading time
Prime Minister Sébastien Lecornu on Wednesday instructed the government to look into using “surplus” tax revenues generated by rising fuel prices to fund measures to reduce the country’s dependence on imported oil and gas, his office told news agency AFP.
With consumer feeling the pinch, the notion of a tax windfall is a sensitive subject. Ministers have previously insisted that higher oil prices would negatively impact public finances by reducing consumption and slowing growth.
The contradiction was seized upon by the opposition, with the leader of the far-right National Rally, Marine Le Pen, calling for any surplus to be used to cut VAT and fuel taxes.
In an interview on French public radio on Wednesday, Laurent Wauquiez of the conservative Republicans party claimed the surplus had reached “between two and three billion euros” since the beginning of the war, and demanded it be “returned to motorists in the form of tax cuts”.
Rising inflation, slowing growth
Junior energy minister and government spokesperson Maud Bregeon denied that surplus revenues were in the billions. Any increase in revenues was “offset by lower consumption, reduced growth and rising interest rates”, she said.
According to the French Observatory of Economic Trends (OFCE), the idea that the state is profiting from an oil shock is mistaken. Not only have its own fuel bills gone up, but rising oil prices are fuelling inflation – on which pensions and social benefits are indexed – and contributing to an economic slowdown that “reduces tax bases and therefore tax revenues”.
France’s national statistics agency, Insee, has already downgraded French growth forecasts for the first half of the year amid inflation that is predicted to top 2 percent.
As the price of France’s most widely used petrol, SP95-110, hit €2 a litre on Wednesday, the government has indicated that it could take measures to help key workers who rely on their cars – for example by introducing a scheme to help them rent electric vehicles.
With oil once again a weapon in the Middle East, is clean energy the key to peace?
Pumps under pressure
Consumers are also seeing their access to fuel squeezed.
Around 10 percent of France’s 9,500 petrol stations have experienced shortages of petrol, diesel or both at some point during any given day, according to public data analysed by AFP. Shortages can last anywhere from a few hours to several days.
The number of stations with total or partial shortages has risen sharply since early March, following the first strikes on Iran which effectively closed the Strait of Hormuz, a key route for global oil supplies.
From an average of 130 stations reporting shortages in January and February, over 700 were reported last week, and nearly 3 percent of stations currently have no petrol or diesel at all.
The maritime passages with a chokehold on the global economy
Most of these are TotalEnergies stations, which have imposed a price cap, leading to increased demand from motorists looking to pay less at the pump, according to Bregeon.
She insisted in an interview with news channel TF1 that there was “no risk of a supply shortage” in France.
The current number of struggling stations remains well below the peak of over 4,500 during the October 2022 fuel crisis, when prolonged refinery strikes caused widespread shortages across France.
The government is due next week to present a plan to reduce France’s dependence on imported fossil fuels through measures such as moving to electric-powered public transportation and switching heating systems from gas to heat pumps.
It has set a target of phasing out coal by 2030, oil by 2040-2045 and fossil gas by 2050.
(with AFP)
