owering UK gas tax not good economics

Miles of trucks and hundreds of men, women and children barricaded refineries throughout Britain this past week. The protests started at the bequest of a Welsh farmer, Brynle Williams, and called for a lowering of the nation’s gas tax. Even though a decrease in the gas tax would bring immediate relief for consumers struggling beneath the high fuel costs, eventually such a measure would only amount to higher prices in the future.
Britain is not the only European nation witnessing civil disobedience on account of elevated petrol costs. A scourge of protests throughout the continent has disrupted the European Union economies, virtually emptying most roads.
To place their strife in perspective, the United States enjoys a 23 percent tax on gasoline, while Britain’s gas tax is 76 percent, the highest in Europe, making fuel about $4.37 per gallon.
In theory, a high gas tax successfully reduces pollution and road congestion by discouraging excessive driving. The demand for the product essentially goes down — decreasing the dependency on oil-producing nations.
Unfortunately, professions such as farming and trucking depend more on gasoline and thus are disproportionately taxed. While the amounts paid for their services remain stagnant, high gas prices increase overhead costs, reducing income.
“Three months ago, the cost of fuel for a job from Liverpool to London would be 100 pounds — now it is 130 pounds. We have to pay for the fuel out of the price we get for the job, and that price does not go up,” says Len Hughes, an independent hauler from Mold, Britain.
Despite mounting criticism, Britain Prime Minister Tony Blair has refused to surrender to protester demands. A British Broadcasting Company poll reported last Thursday that 80 percent of the British population supports the protests, even though the disruptions emptied almost all 12,500 British filling stations, endangered lives and severely disrupted civilian life.
Afraid of losing “moral ground” with the public, protesters agreed to end the siege at 5 a.m., Sept. 14. Williams hopes the government will offer tax break in the next 60 days in exchange for ending protests.
While there is no question that what is happening to farmers and truckers in Europe is unfair, high taxes are not solely responsible for the increased price of gas. The world’s oil cartel, the Organization of Petroleum Exporting Countries, is largely responsible for the highest crude oil prices since Iraq’s 1990 invasion of Kuwait.
Oil companies are also suspect for the incredibly high prices. Throughout the protests in Britain, they were strangely reluctant to force their drivers through what were originally token protest lines in the beginning of last week’s siege. After all, lower gas taxes could only benefit their sales.
As soon as Blair announced that he had no plans to concede to protestors, two of the country’s major oil companies, Esso and TotalFinaELf, announced that despite protests they were raising prices on gas and diesel fuel. Their timing could not be worse and their reasons for doing so are a mystery, especially since Shell and BP, Britain’s other two major gas companies announced that their present prices would remain the same.
Britain’s high gas taxes are offset by lower sales and income taxes. If the gas tax decreases, the government must increase another tax to keep the budget balanced, as required by the EU charter.
Lowering gas taxes would only send the message to OPEC and oil companies that when they raise prices, governments lower the taxes and nothing will effect demand for the product.
Dr. Edward Foster, chairman of the University economics department, agrees that taxes should not be lowered to accommodate a section of the public and explained that if protestors got what they wanted, money would virtually, “transfer from EU governments to OPEC.”
Although unfair and unjust, the high gas prices should be born with the understanding that if the market is left alone, demand will decrease and inevitably the price of gas will decrease as well.
If what the public really supports about the protests is the injustice of the modern market, perhaps the issue of subsidies or the increase of social welfare programs should be further explored. In the best interests of Britain and other EU nations, gas taxes should not be decreased for the immediate gratification of the public.