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Economists Call for Higher Petrol Taxes in Germany

In the debate over how to cope with soaring oil prices, one German economist think tank has made an appeal for higher taxes.

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Pay up: German gas prices are at postwar highs.

In the wake of increasing world wide demand for fuel, the Institute for World Economics (IfW) in Kiel has called for an increase in Germany's ecology tax on gasoline.

"If (ecology taxes were raised) in a concerted effort among many industrial nations, it would lead to greater energy efficiency and would take pressure off the world oil markets," IfW natural resources expert Gernot Klepper told the Berliner Zeitung newspaper.

In the long term, Klepper said, such a tax increase could have a positive effect on the economy.

'Pull the emergency brake'

At least one newspaper editorialist begged to differ. "Whoever would dream of asking for an increased ecology tax, given the current economic situation in Germany, must have completely lost all his economic marbles," wrote the Essen-based Neue Ruhr Zeitung.

For its part, the Automobile Club of Germany has called on the government to lower the ecology tax on petrol. "It is now a matter of pulling the emergency brake on the prices. Many people can't even afford to get to work," spokesperson Jochen Hövekenmeier said in early May.

But the recent record prices for oil and gas have failed to make much of an impact on Germans' driving habits, according to data from the Association of the German Petroleum Industry (MWV).

For the first four months of the year, gasoline use was down just 2.4 percent from a year earlier, MWV spokesman Klaus Picard told Die Welt newspaper.

Call for 'harmonization'

However, Picard also did not come out in favor of lowering the ecology tax, saying such a move would be "pointless." Rather, Germany should push for a harmonization of gas prices within Europe.

Germans pay the second-highest gas prices in Europe after Britain. This discrepancy leads to what is called "tank tourism," where drivers cross borders for better gas prices.

For his part, Klepper predicted continued strong increases in oil and gas prices. He said he expects a barrel of oil to eventually surpass $50 (€42). Currently the per barrel price is around $40. Moreover, the high prices are here for the long term, Klepper said, citing growing demand in Asia and limited production capacity.

Bleak future

According to Klepper, politicians shouldn't try to convince consumers that the high prices are only temporary, and that they should be offset by abolishing the ecology tax.

It is "illusory to think that oil, and thus gasoline, are ever going to be really inexpensive again," the IfW expert said.

A long-term trend toward reduced fuel consumption lies mainly in developing more efficient cars and the increasing use of diesel cars, the MWV's Picard said.

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