Does Norway have the will to change its gasoline price system?

Apr 23, 2005 02:00 AM

Car owners in the United States may grumble as the price of gasoline hovers around $ 2.25 a gallon. Here in Norway, home to perhaps the world's most expensive gasoline, drivers greeted higher pump prices of $ 6.66 a gallon with little more than a shrug.
Yes, there was a protest from the Norwegian Automobile Association, which said, "Enough is enough. " And a right-wing party in Parliament, the Progress Party, once again called for a cut in gasoline taxes, which account for about 67 % of the price.
But "those critics are but voices in the wilderness," said Torgald Sorli, a radio announcer with the Norwegian Broadcasting Corporation who often discusses transportation issues.
"We Norwegians are resigned to expensive gasoline. There is no political will to change the system."

Norway, the world's third-largest oil exporter, behind Saudi Arabia and Russia, has been made wealthy by oil. Last year alone, oil export revenue surged 19 %, to $ 38 bn. But no other major oil exporter has tried toreel in its own fuel consumption with as much zeal as Norway.
These policies have resulted in Norwegians consuming much less oil per capita than Americans -- 1.9 gallons a day versus almost 3 gallons a day in the United States -- and low car ownership rates. On city streets and rural roads, fuel-efficient Volkswagens and Peugeots far outnumber big sport utility vehicles.
[Norway's gasoline policies stand in contrast to those in the United States, where President Bush made cheaper gasoline a priority during his discussion of energy policy at his news conference.]

Gasoline, of course, is not the only expensive commodity in Norway, a traditionally economical and highly taxed nation. At a pub in Oslo, for instance, a pint of beer might cost the equivalent of $ 12 and an individual frozen pizza $ 16. But expensive gasoline is rare among large oil-producing countries that often subsidize fuel for their citizens. Gasoline prices in Norway -- with a currency, the krone, strong in comparison with the dollar-- have climbed 30 % since 1998, outpacing a 15 % increase in the consumer price index in that period, the national statistics bureau said.
Having the world's highest gasoline prices is just one strategy to combat greenhouse gases in this redoubt of welfare capitalism and strict environmental laws. Overall energy consumption, especially of electricity, is quite high, however, with Norway blessed with not just oil but ample hydropower resources.

Norway not only taxes its gasoline. Norwegians also pay automobile taxes as high as $ 395 a year for each vehicle, and in Oslo there is even a "studded-tire" fee of about $ 160 for vehicles with all-terrain tires that tear up asphalt more quickly in the winter.
Then there are the taxes on new passenger vehicles that can increase the price of imported automobiles. Norway has no auto manufacturing industry aside from an experiment to produce electric cars, and economists have suggested that that has made it easier to limit automobile use in Norway because there is no domestic industry to lobby against such decisions as in neighbouring Sweden, home of Saab and Volvo.
Norway designed the duties to make large-engine sport utility vehicles much costlier than compact cars. For instance, a high-end Toyota Land Cruiser that costs $ 60,000 in the United States might run as much as $ 100,000 in Norway.

Economists argue that gasoline prices and other auto taxes in Norway are not so expensive when measured against the annual incomes of Norwegians, among the world's highest at about $ 51,700 a person, or the shorter workweek of about 37.5 hours that is the norm here. (Norwegians also get five weeks of vacation a year.) The government frequently makes such arguments when responding to criticism over high fuel prices.
"We do not want such a system," Per-Kristian Foss, the finance minister, said in a curt response to the calls for lower gasoline taxes this month in Parliament.

Other European countries have also placed high taxes on gasoline, and some like Britain and The Netherlands have gasoline prices that rival or at times surpass Norway's. In Oslo, as in other European capitals, there is ample public transportation, including an express airport train that whisks travellers to the international airport from downtown in 20 minutes.
Yet Norway, with a population of just 4.6 mm, differs from much of Europe in its breadth, with an extensive network of roads, tunnels and bridges spread over an area slightly larger than New Mexico.

"Rural areas without good public transportation alternatives are hit a little harder," said Knut Sandberg Eriksen, a senior research economist at the Institute of Transport Economics who estimates the government collects about $ 2.4 bn in fuel taxes alone each year, or about $ 519 for every Norwegian. Some of the revenue supports Norway's social benefits.
"Our government has been grateful to use the automobile as a supreme tax object," Mr Eriksen said. "The car is its milking cow."

Perhaps as a result of such policies, Norway has lower levels of car ownership than other European countries, with 427 cars per 1,000 people in 2003 compared with more than 500 cars per 1,000 people in both France and Germany, according to the Economist Intelligence Unit. The United States has more than 700 cars per 1,000 people.
The average age of a passenger car in Norway is 18 years when it is scrapped, though this might be changing in a strong economy with the lowest interest rates in 50 years. Registrations of new passenger cars last year climbed 29 % from 2003. But the frugality of some Norwegians, even in rural areas, suggests older cars will remain at many households.

"Personally I have no need for a new vehicle; I'm proud to hold on to my own for as long as I can," said Johannes Rode, 69, a retired art and music teacher and owner of a 29-year-old red Volkswagen Beetle in Ramberg, a coastal town in northern Norway. "To do otherwise would be wasteful and play into the oil industry's hands."
Caution about oil's risks is common inNorway. The government created the Petroleum Fund more than a decade ago as a repository for most of the royalties it receives from oil production. The $ 165 bn fund, overseen by the central bank, is intended for the day when oil resources in the North Sea start to dry up.

Meanwhile, unlike other large oil producers like Saudi Arabia, Iran or Venezuela, Norway has done little to encourage domestic petroleum consumption. In part because high gasoline prices deter such a luxury, Norway consumes little more than 200,000 bpd of oil while exporting nearly its entire production of 3.3 mm bpd. This confounds some Norwegians.
"Norway is a rich, oil-producing country with no foreign debt," said Egil Otter, a spokesman for the Norwegian Automobile Association, a sister organization to AAA. "We think that Norway, with its enormous and complicated geography and distances, deserves pump prices at an average European level. Motorists find it very difficult to be taxed into these extremes."

Such opinions contrast with the quick defence of high gasoline prices often voiced around Norway, which is celebrating its 100th year of independence from neighbouring Sweden and so far has opted out of joining the European Union.
Sverre Lodgaard, director of the Norwegian Institute of International Affairs, said Norway had a responsibility to manage its oil resources soberly because of its support of worldwide limitations on greenhouse-gas emissions.
"We are engaged on this front," Mr Lodgaard said. "It is difficult for us to view the example of the United States, which is overconsuming to an incredible extent."

The United States, which uses about a quarter of the world's daily oil consumption, had the cheapest gasoline prices of the 27 industrial countries measured by the International Energy Agency in its most recent analysis of fuel prices. Taxes accounted on average for just 20 % of the price of gasoline in the United States, the agency said.
Even amid Norway's bluster on gasoline prices, however, environmentalists suggest the nation could do more to achieve greater energy efficiency. One sore point is the consumption of electricity, traditionally generated by hydropower but soon to depend more on a fossil fuel, natural gas.

Producing oil for export in Norway requires large amounts of electricity, and homes in the country, with much of its territory above the Arctic Circle, use electricity for heating, creating much higher electricity consumption levels than elsewhere in Europe. It is not uncommon to drive on well-lighted roads even in remote areas.
"There are areas in which we have done O.K.," said Dag Nagoda, a coordinator in the Oslo office of the WWF, formerly known as the World Wildlife Fund. "And there are areas in which we can do better."

Source: Times Daily
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