If you balk at $3 a gallon, be glad you're not British

England: Fears of shortages create panic, push price to $10.

The Cost Of Energy

September 15, 2005|By Todd Richissin | Todd Richissin,SUN FOREIGN STAFF

LONDON -- From the Monty Python School of Economics comes this true lesson of why gasoline in Britain yesterday -- when it could be found -- shot up, in some places, perilously close to $10 a gallon.

Somehow, the very sound non-Pythonistic principles of supply and demand were involved. But they only partly explain the simultaneous creation of gasoline shortages where there reasonably should be none and prices that could almost make Americans silence their whining at the pumps.

Here's what happened: Truckers who have been complaining forever about rising fuel prices, which oil companies have been blaming on rising demand, finally got sufficiently fed up that they threatened to blockade oil refineries and disrupt deliveries of Britain's abundant gasoline supplies. Their demand was that the government lower the substantial tax on gas.

The government said no way, but it quickly sought to calm nerves all around, with unwanted results.

Reassurance, anxiety

The chancellor of the exchequer and the Ministry of Energy assured motorists that plenty of gas was on hand for all, which only caused more anxiety. When officials tried harder, assuring the public that the government had a plan to keep the gasoline flowing, they bumbled into the word rationing, which had the same predictable effect as a lighted match dropped into an oil well.

Panic buying quickly ensued, which meant so much gas was pumped so quickly from the country's stations and into the country's cars that more than 3,000 of the 10,000 gas stations in Britain were forced to close yesterday, their tanks dry.

"We're a funny lot, aren't we?" said Ray Holloway, a spokesman for Britain's Petrol Retailers Association, who said he watched with a mixture of bemusement and terror as the situation grew more serious. "It's spot-on that there was so much yelling that the sky was falling that the sky indeed fell.

"Well, perhaps that's a bit much, but that's a helpful way of looking at it."

Helpful, indeed, but there seems little understanding here of why gas prices have risen so sharply so quickly, and there is genuine trepidation because winter never seems far off in Britain and heating bills are expected to rise for some people by about $600 over the course of the season.

Gasoline in London has shot up from just under $5.50 a gallon a year ago to an average of about $7 a gallon, and yesterday's spike of nearly $10. Prices here and in the rest of Europe are perpetually higher than in the United States because hefty taxes are imposed here to discourage the reliance on foreign oil, to encourage public transportation, to ease road congestion and for the sake of the environment.

Gasoline has historically been accepted throughout Europe as something of a luxury.

With prices shooting up worldwide, British truckers toward the end of last week threatened to repeat a tactic that nearly shut down the country in 2000.

Back then, brief blockades were remarkably effective, with truckers stopping the flow of gasoline from the country's 20 refineries, from Stanlow in northwest England, to Grangemouth in Scotland, to Cardiff in Wales.

The protests were over Britain's gas tax, which remains the highest in Europe, then at about 80 percent of the cost of a gallon and now -- adjusted for the higher raw cost -- about 64 percent.

The blockades succeeded in stopping about 90 percent of the normal flow of gasoline, costing Britain an estimated $350 million a day.

When the first whispers of a blockade scheduled for yesterday emerged, Britons drove right to the pumps and filled their tanks to the brim.

"Every single person drove away with every drop they could," said Roy Kugan, the manager of a Shell station on Warwick Road in South Kensington, his convenience store empty because his pumps had no gas. "Nobody was pumping M-#5."

The government tried to be helpful -- in the worst possible way.

The chancellor, Gordon Brown, gave a speech Tuesday that served to draw attention to the run at the pumps, assuring motorists, "The only thing that could cause disruption and instability is people responding to a shortage of supply that simply doesn't exist."

Newspapers and television, of course, printed and broadcast pictures of just that, while the government also sought to calm nerves by announcing plans were in place to ensure that police and emergency personnel would have means to get gas, which quickly became "gas rationing," which quickly led to an even further run on supplies.

And that, as will happen, led to already high prices of gasoline begin boosted even higher -- gouging, as it's known.

No blockade after all

And then, of course, the gates of the refineries that were to be blockaded yesterday were not. About the only people on hand at the refineries were reporters trying to pump excitement into their reports saying such things as, "Britain dodged a bullet."

But not really.

With nearly one-third of the country's gas stations closed, hourlong lines formed at stations whose tanks were not empty, and one protester told The Guardian newspaper that the threats would indeed become reality.

The protester, who also appeared on television and will be known only by the Tony Blair mask he wears and the Captain Gatso name he insists on, said the government had better lessen the taxes or the protests that did not exist over the fuel shortage that did not exist would "mushroom to something really big."

The refineries would indeed be blocked, he promised, as did the Road Haulage Association, and sooner or later car tanks would run as dry as the station tanks, with no deliveries allowed.

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