Doris Leblond
OGJ Correspondent
PARIS, Sept. 12 -- French Finance and Economy Minister Thierry Breton has threatened to initiate a windfall profits tax against oil majors Total SA, Esso, BP PLC, and Royal Dutch Shell PLC—all of which operate refineries in France—if they do not develop "concrete and tangible proposals" to "return to consumers a part of the exceptional profits corresponding to an exceptional situation amassed since the beginning of the year." The proposals are due at a Sept. 16 meeting Breton has convened.
Chief among the minister's suggestions was a drop in the price of motor fuels sold at service stations, the development of a hybrid automobile engine, investments in renewables, more biofuels incorporation in motor fuels, and refinery improvements.
The companies declined to comment. However, BP spokesman Philippe Lambert said his company is preparing propositions on biofuels and renewables, areas in which the company is heavily involved in France and globally.
At a press conference Sept. 7, Total Chairman and CEO Thierry Desmarest said refining margins in France had fallen to 1 euro ¢/l.
"Industry will go to the meeting [with the minister] in a very positive frame of mind," said Jean-Louis Shilansky, delegate general of the oil companies' trade group, Union Française des Industries Pétrolières. He told OGJ that it was necessary to separate taxation from such initiatives as the "clean" automobile, biofuels, renewables, refinery improvements, and energy savings, all of which companies would willingly promote.
Industry was more reserved over taxation, which Shilansky insisted would be "inefficient to reduce prices at the petrol pump." He pointed out that oil products were already heavily taxed in France—at some 2 billion euros/month. And competition with hypermarkets, which currently hold a 53% share of the distribution market, was very strong.
The government may have been influenced by pressure from trade unions and consumers, especially after Total announced the previous day a net income of €6.287 billion for the first half of 2005, up 44% over first half 2004.
Other EU reactions
European Union finance ministers and the Eurogroup [the 12 EU nations that use the Euro currency] held meetings hosted by the UK and warned against reacting to high oil prices "by reducing [excise] rates or VAT levels." If there should be targeted measures in favor of special economic sectors, "these measures should not involve taxes," they said.
The 25 EU finance ministers meeting in Manchester Sept. 10 issued a common declaration, warning against "political interventions preventing the necessary adjustment" to high oil prices.
They stressed the "importance of structural reforms to render Europe's economy more resistant to shocks" and called for an intensified dialogue with producer nations, and for oil companies to increase exploration investment and refining capacities.
"Global problems call for global solutions," said UK Chancellor of the Exchequer Gordon Brown, who presided over the London meeting.
