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Last Updated: Friday, 9 September 2005, 20:30 GMT 21:30 UK
Oil firms act to avert French tax
Paris petrol station
French unleaded petrol prices have risen 13.4% in the past year
Oil giants BP and Total have agreed to cut French fuel prices after government threats to levy a new tax on oil firms in the face of soaring crude prices.

Total cut prices by 0.03 euros a litre for petrol and 0.02 euros per litre for diesel. BP said it would follow suit on Monday with the same cuts.

But Total added it would reduce prices by the same amount again on Saturday.

The move came as European Finance heads discussed the economic fallout of surging oil prices at talks in the UK.

It also came a day after French Finance Minister Thierry Breton urged the industry to hand back some of its huge profits through price cuts.

Action threat

On Thursday he had warned he may be forced to slap a "special tax" on oil firms if there were no better solution to the problem of rising fuel and energy bills.

Total said it had already started to reduce its prices before Mr Breton's comments as crude prices fell back from record highs above $70 a barrel.

The oil sector players have a particular responsibility in this domain because they are making exceptionally big profits
Jean-Claude Juncker, Luxembourg PM

During the first six months of the year, the firm had been making profits of around 1.5 million euros an hour.

Mr Breton welcomed the move which came a week ahead of a special meeting he has called to discuss the problem which has recently pushed petrol prices in the country above 1.50 euros a litre.

In a statement he added that the price move represented a "constructive approach" to the problem of how to reduce the effect of surging prices on the French economy ahead of the talks on 16 September.

It was not immediately clear whether similar steps would be taken across Europe.

Europe-wide worries

However, the 25 ministers meeting in the UK for a two-day European economic summit have also called for action amid growing worries over rising energy prices.

"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 following the first day's talks.

Meanwhile, UK Chancellor Gordon Brown also voiced fears that spiralling prices could put an already fragile economic recovery at risk.

"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," Italian Economy Minister Domenico Siniscalco said at the Manchester meeting.

One other country to take direct action against surging oil prices was Belgium, whose government has announced it will be refunding part of that VAT charge placed on domestic heating oil.



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