Petrol prices must not fall (editorial August 2011)

16 August 2011:

The price of oil fell to $86. This is bad news, not only from an ecological perspective but also from an economic one. It will push us to consume more fuel, and give us less incentive to focus on its replacement. A change in taxation could ensure that prices are set high enough to encourage research, and that research is funded by the state.

In the midst of a political and stock market crisis, the drop in the price of oil is announced as good news in the midst of the turmoil. Apart from the fact that its repercussions will not be immediately beneficial to our summer transhumance, it is bad news in the long term.

With a barrel of oil at 87 dollars (60 euros), we are now a long way from its peak in the summer of 2008 (almost 150 dollars). In other words, in euro terms, the price of a barrel is half of what it was three years ago. If we can see on the long term curves a good correlation between the price of oil and the price at the pump, we cannot say that petrol costs half as much as three years ago. On the other hand, it is well known that "perception is reality", and this perception, which is more tenacious than the facts, leads public opinion, i.e. us, to consider that prices adjust upwards more quickly than downwards.

But above all, rejoicing at the fall in the price of oil is an ecological paradox.For several years now, environmental awareness has been growing, and a great deal of education and demonstration has been done to encourage energy saving and the preservation of natural resources, whatever they may be. If there is one thing that should - reasonably - increase, it is fossil fuels, which, contrary to appearances, have almost stagnated for 30 years in constant currency. The easiest way to see this is to compare it to the net pay of one hour of minimum wage: 7.06 net per hour, you pay about 5 litres of petrol at 1.40 euros, or 12 minutes of work for one litre, whereas it took 16 minutes of work in 1980 or 45 minutes in 1955.Compared to the evolution of real estate prices, health care prices or the price of bread, the price of petrol has shown a more than reasonable trend.


Alternative and renewable energies need expensive oil


Fossil fuels still account for around 75-80% of the world's energy mix and are of course high emitters of greenhouse gases. Maintaining the illusion of cheap value discourages alternative energies that have not yet reached their optimal level of performance and efficiency. Alternative and renewable energies need expensive oil, for a simple reason of competitiveness. And we need to develop these other sources of supply, it's a question of long-term management and anticipation.

On the other hand, and even if it is counter-intuitive, the lower the price of oil, the fewer reserves there are (because it is not profitable to exploit certain fields), and conversely, a high price increases reserves thanks to profitable exploitation triggered by the level of the price per barrel.

While high petrol prices are good for our energy savings as consumers, they are also the best incentive to research and develop more energy-efficient engines and equipment. If you want alternative energies and to consume less per kilometre, the price of petrol must not fall. Keeping the price of petrol up also means prolonging the reserves by encouraging savings and preparing, over a very long period, for the necessary energy change.

Environmental awareness is losing momentum today because it is a long-term, almost painless concern, overtaken by much more tangible and anxiety-provoking concerns in everyday life. And because we may care about the environment as a global citizen, but as a consumer we are also looking for the benefit we can get from it. The 'self-interested' concern is probably even more effective, and ultimately not necessarily less virtuous or less moral. These are also issues which, over their long time frames, are subject to fluctuations which may seem contradictory.


Generate additional revenue for the state


However, when the price at the pump increases, the volume of petrol consumed decreases and so does the revenue for the State because the main tax (TICPE - Taxe Intérieure de Consommation sur les Produits Energétiques) is fixed per litre. The idea would be to maintain a slow upward trend in the price at the pump by preventing the price from falling again, by making the TICPE variable, by cushioning market fluctuations and, above all, by allowing the State to benefit from the fall in the price of oil. The State could thus generate additional revenue in the event of a drop in prices (taxes would compensate for this to maintain a stable price), cushion any excessively sharp rises, while continuing to encourage energy savings to accompany the long-term energy transformation.This declining "oil pot" could be used to invest in new energy.

Of course, this is neither good for purchasing power nor for the electoral incentive, but it is the responsibility of the politician to accompany the changes, to inscribe them in time, without them being dictated by brutal, untimely, undoubtedly irrational, stock market fluctuations such as we are experiencing these days.


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