Oil firms cut pump prices

Oil giants Total and BP agreed to cut petrol prices last week after intense political pressure to limit the damage from surging fuel and energy bills for households and businesses across Europe.

The decision was announced by French Finance Minister and BP in Paris during a meeting of 25 European Union Finance Ministers in England, where politicians have been demanding action from oil firms which are making record profits from surging oil prices.

Total, which made profits of about €1.5 million an hour in the first six months of this year, said it would cut unleaded fuel prices by €3 cents per litre and diesel by €2 cents.

French Finance Minister Thierry Breton, who said he might be forced to slap a tax on them if there was no better solution to the problem, welcomed the cuts in a statement.

It was not immediately clear whether there could be similar moves in other countries in Europe or by other companies such as Shell and Exxon.

But the 25 ministers meeting in Manchester emphasised they wanted help amid mounting protest by consumers and fuel-reliant businesses such as truckers and taxi-drivers.

"The oil sector players have a particular responsibility in this domain because they are making exceptionally big profits," Jean-Claude Juncker, Luxembourg's prime minister, said after chairing the talks in Manchester.

"We want them to invest more in exploration, production and refining, where they have been reticent in recent years," said Mr Juncker, who is Luxembourg's Prime Minister and chaired talks among the eurozone's 12 Finance Ministers.

Chancellor Gordon Brown, overall chairman of the two-day meeting, said inflation appeared to be less of a problem than during the oil crises of the 1970s but that there was a danger to economic growth.

"Clearly the doubling of oil prices has an impact," he said.   

The ministers said they had agreed to try to coordinate their response to dearer oil by helping poor families while trying to avoid giving big tax breaks to specific businesses such as taxis and transporters.

"European ministers again agree that it's not a question of lowering prices by adjusting excise duties but probably of helping poorer families with compensation measures," said Italian Economy Minister Domenico Siniscalco.

As the ministers met, Belgium announced plans to refund part of the 21 per cent value-added tax normally paid on domestic heating oil. France too has said it will give many households a €75 cheque.

Soaring oil prices may hit growth in the overall economy but the potential damage had been mitigated by better control of inflation compared with at the time of the oil crises of the 1970s, Mr Brown said.

Mr Juncker said economic growth in the 12-nation eurozone could slip closer to one per cent this year if prices stayed near $70 a barrel.

The European Central Bank has already cut in its growth forecast for the eurozone to 1.3 per cent, about a third of predicted US growth rates and ECB chief Jean-Claude Trichet said he would remain vigilant for inflationary dangers.

Truckers across Europe staged protests demanding subsidies and tax cuts in 2000 after France's left-wing government of the time infuriated Britain and other countries by caving in and offering big financial relief to truckers who blocked motorways.

Protest has been simmering since world oil prices topped $70 a barrel but the unrest has not yet reached the scale of 2000.