A hefty price to pay
It's been a timely crisis. The Europe of the IT generation has been given a stark reminder that the old economy still runs things. Investors may rush into new IT ventures with one eye on the Nasdaq and consumers may bulk buy the latest IT products, but when it comes to the smooth running of an economy oil is still king.
As Europe's truckers and farmers seethed with anger over fuel prices, the continent momentarily came to a standstill. In Poland, the protests were not as acute. Truckers and farmers manned limited blockades around the country, but with a government constrained by increases in international oil prices there was little room for concessions in the short term.
The fact remains that European oil prices are far too high, and voters are demanding a change. A fuel tax is a windfall for any treasury. Politicians remain electable by promising more funds to, say, the health sector and cutting income taxes. Consumers are told that fuel increases are the price of green-friendly policies and lessen dependence on the Middle East.
But OPEC said last week that governments and speculators were driving up the price of oil to above $37 a barrel from $28 in May. With some European governments taxing fuel by as much as 80%, the Middle East can't take all the blame. As the WBJ went to press, panic buying in some countries continued as rumors spread of renewed fuel blockades.
In Poland, spiraling price hikes on fuel will affect the lives of more than just farmers and truckers. With the rise in oil prices comes the usual increase in natural gas prices, which usually lag behind oil by about six months. Both price hikes will inevitably force inflation to rise once again and the victim of the cycle will, as usual, be the consumer. Once again, government predictions about inflation targets will be wide of the mark. Watch this space.
The government can do little to stop rising fuel costs throughout the world, but it can do its own damage control at home. It scrapped a 3% tariff on gas and 4% duty on diesel imports earlier this month. It could do more, though. It could ease prices at the pumps by deregulating the fuel sector. Gasoline prices have risen to zl. 3.3 per liter from zl. 1.8 a liter last year and the industry is still in the grip of the Polski Koncern Naftowy Orlen monopoly, which sets the fuel prices and keeps the lid on foreign retail competition.
Poland's government tax on oil is one of the more benign in Europe at 58%. But it's still a far cry from the U.S. rate of 24%. When refueling their cars, Poles can be happy in the knowledge that they're one of the lesser taxed nations on the continent, but it's still a hefty price for Jan Kowalski to pay if he's earning half that of a blue-collar worker in the American midwest. But more worryingly, Poles could be paying far more than just high fuel prices if the current trend continues.
