Price of oil riles Europe

The Organization of the Petroleum Exporting Countries stranglehold on the world's oil supply has sent waves of distress across the world, reminiscent of those from the oil crisis in 1979.\nThe price of crude oil has jumped nearly 350 percent over the past year from $10 per barrel one and a half years ago to about $35 today. OPEC's recent failures to reduce the price of oil and its apparent incoherence of future plans make it hard to expect prices to come down any time soon, according to The Economist. \nAli Rodriguez, Venezuela's oil minister, said OPEC is ready to increase production by two million barrels per day, which is now impossible. Their commitment to increase and decrease supply in order to maintain a price between $22 and $28 per barrel has also failed to materialize.\nWhile the largest price increases at the pump have occurred in the United States, protests have spread across Western Europe, affecting countries such as France, Britain, Germany, Belgium, Spain and the Netherlands. \nBritain has been arguably the hardest hit country. According to The Economist, nearly 90 percent of its gas stations were completely out of unleaded gasoline at the height of the protests which started Sept. 7. Fuel trucks with police escorts began refilling stations Wednesday. The panic caused some schools in rural districts to close and has caused some of Britain's major industries, including trucking and automobile manufacturing, to crawl to a standstill. \nThe British Chambers of Commerce estimated the total cost to the British economy to be about$350 million a day, 10 percent of the daily GDP. The protests blocked many of England's major refineries and fought for lower taxes on gasoline. Tony Blair, Prime Minister of Great Britain, has stood strong, refusing to cut the sales tax on gasoline, which makes up nearly 80 percent of the price charged to consumers. Most other European governments have similar, although lower taxes on gasoline.\nThe French government, led by Prime Minister Lionel Jospin, gave in to protesters' demands. The concessions, in the form of tax cuts given by Jospin, could total as much as $900 million over the next few years. \nHis statement to the Dow Jones news service, "There will be no more concessions," which was made before the final concessions were given, rings hollow. Jospin's poor handling of the protests has lead to a drop in his approval rating by 20 percentage points. According to the Times of London, it is the swiftest drop for a French Prime Minister in polling history.\nGerman Chancellor Gerhard Schroeder agreed to give $444 million towards housing assistance for poor Germans, USA Today reported. The German government also said it will raise the number of people who qualify for a tax write-off. The protests slowed as traffic in Germany got back to normal over the weekend.\nWhile EU governments are battling protesters, some in the United States are optimistic about the spike in the price of crude oil. Bill Cheney, chief economist at John Hancock Financial, said in the Dow Jones News service, "The world will once again marvel at the unique ability of the U.S. economy to roll with the punches and come out on top."\nCheney said he believes the windfall profits oil producers make will be invested in the United states, rather than Europe, where investor sentiment is being questioned as governments and protestors continue to clash.\nRoger Ferguson, Federal Reserve vice chairman, told Reuters, "The spillover (from oil prices) still seems to be really quite contained." He was basing his statement on data showing consumer prices dropped 0.1 percent in August.\nThe U.S. dependence on oil has dropped nearly half since the oil crisis in 1979 from 5 percent of GDP to only 3 percent, the Wall Street Journal reported.\nThough some appear to be complacent about the surge in crude prices, President Bill Clinton is working to prevent adverse effects on the U.S. economy, such as widespread protests or another recession. "I will do everything I can to minimize any adverse impact (of high energy costs) on the American people," he said.