A European Commission (EC) report published this month reaches the altogether unstartling conclusion that the affordability and consumption of transportation fuels are related to one another. Europeans should be on guard. From just such observations of the obvious often flow grievous errors of policy.
The report comes from the EC's environmental directorate and Eurostat, the Statistical Office of the European Communities, under the aegis of the European Union (EU) goal of "sustainable mobility." For 10 EU member countries, the report tracks the share of net disposable income per person required to buy 1,000 l. of a weighted mix of vehicle fuels. In each country and for the group at large, the share plummeted.
"As the price of fuel relative to disposable income has fallen," the report observes, "the consumption of fuels has increased."
Rising consumption
Of course it has increased. In the absence of extraordinary influences, the consumption of any commodity increases when its affordability rises.
According to the report, the fuel price per 1,000 l. relative to average disposable income per capita for the 10 countries as a group fell from 7.7% in 1980 to 4.9% in 1994. Among the largest consumers, the decreases were from 7.3% to 4% in Germany, 8.2% to 5.1% in the U.K., and 6.8% to 4.1% in France.
These are big changes. Yet it is no more startling that fuel affordability increased during this period than it is that fuel consumption increased as a consequence. In fact, the period chosen for the comparison exaggerates results. The starting point, 1980, was an historically high year for oil prices in many categories, including yearend quotes for Brent blend and the average annual price of Arabian light crude oil. It was also an economically sluggish year, with industrialized countries straining from high rates of inflation and slack growth, twin legacies of the crude price leap of the late 1970s.
In 1994, by contrast, yearend Brent quotes were at their second lowest level and Arabian light at its lowest annual average since 1988. And most European economies were in recovery, meaning incomes were rising.
Eurostat's news release on its study doesn't mention the aberrant forces that strained both dimensions of fuel affordability in 1980 or the more-cyclic influences that combined to make European fuel especially affordable in 1994. The context would have been useful.
Instead, the impression is strong that Europeans use "too much" fuel for transportation because it is "too cheap." Eurostat does nothing to discourage the inference.
"Energy use depletes the earth's resources," it notes in another helpful assertion of the self-evident. Then this: "The stocks of fossil fuels are limited and cannot be guaranteed for future generations."
Might a political agenda lurk in all this? Governments always talk about the need to preserve resources for future generations before they raise taxes. And European governments are unusually desperate for revenues these days. All but three of them-those of Denmark, Ireland, and Luxembourg-haven't met the EU's budgetary targets for economic and monetary union (EMU), due for launch in 1998.
Big tax load
Yet from a non-European perspective, any addition to taxes on European motor fuels seems inhumane. In every major fuel consuming country of Europe, taxes account for 75% or more of retail prices of gasoline and at least 55% of retail prices of diesel. This burden on mobility partly explains why European economies have had trouble sustaining recovery in recent years. Higher taxes could knock them back into recession and sabotage EMU from the output side of its economic targets.
But then, by the parameters implied by the Eurostat report, recession might be useful. People tend to travel less than they would otherwise and thereby preserve more resources for future generations when they're out of work and short of money.
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