Dominique de Villepin, French prime minister, on Tuesday moved to head off threatened protests by announcing rebates on fuel taxes for farmers and fiscal incentives for the production of environmentally friendly bio-fuels.
His announcement came as the UK, which is facing the prospect on Wednesday of a repeat of the fuel price protests that plagued the country five years ago, ruled out cutting fuel duties to alleviate the impact of soaring prices.
Gordon Brown, the UK chancellor of the exchequer, called instead for oil producers to pump more oil and said co-ordinated international action was needed to bring stability to world energy markets. “The first action we must take is to tackle the cause of the problem: ensuring concerted global action is taken to bring down world oil prices and to stabilise the market for the long term,” Mr Brown told a conference of trade unions.
He said the Organisation of the Petroleum Exporting Countries must respond at its meeting on September 19 to rising demand by raising production.
His remarks came as petrol stations across the UK experienced waves of panic-buying by motorists concerned that protests would lead to supply shortages. Five years ago, blockades of refineries disrupted fuel supplies and brought parts of the country to a standstill.
The organisers of Wednesday’s protests said that they would not disrupt supplies. The government has put in place contingency measures to deal with panic buying of fuel, allocating reserves for essential use.
Mr de Villepin’s plan met with a warm reception from farming leaders when the prime minister unveiled it at an agricultural show in Rennes before leaving for New York to stand in for ailing President Jacques Chirac at a United Nations summit.
However, the prime minister’s appearance was marred by about 100 taxi drivers protesting over oil prices, claiming they were being left out by the state. Fishermen, hauliers and ambulance drivers have also called for help on fuel costs.
So far Mr de Villepin’s two-pronged strategy of promising aid for the worst-hit areas of the economy and putting pressure on oil companies to cut prices at the petrol pump has managed to avoid a repeat of the oil protests that brought France to a halt in 2000.
He was given the full support of Mr Chirac on Tuesday. The president bounced back from his sickbed, having spent last week in hospital with a vascular complaint, to throw his weight behind his government’s call for oil companies to cut fuel prices.
At Tuesday’s cabinet meeting in Paris, Mr Chirac called for “everything to be done” to encourage oil companies to keep cutting prices at the petrol pump and invest more in renewable energy.
Total and BP cut their French petrol prices last week after Thierry Breton, finance minister, threatened to impose a windfall tax on oil profits.
In Rennes on Tuesday, Mr de Villepin said his farming aid plan would cost about €30m a year, boosting tax rebates for farmers on heating oil, natural gas and heavy oil, as well as lower taxes on farmland.
He promised more tax incentives for bio-fuel producers and announced plans to build a bio-fuel electricity plant. He said bio-fuels would generate 10 per cent of French energy needs by 2015.
French hauliers on Tuesday gave a mixed reception to a government plan announced on Monday to spend €400m a year on cutting corporate taxes in the struggling sector to alleviate the oil price burden.
Separately, an opinion poll for Libération newspaper and Yahoo website taken at the weekend showed a rebound in approval ratings for both Mr de Villepin and Mr Chirac. The prime minister gained 3 percentage points to 45 per cent and the president rose 8 points to 40 per cent.
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