1. Issues associated with the rise in oil prices

a) The price of a barrel of crude has broken the $60 barrier, having risen sixfold since 1998. Clearly, surging oil prices reflect the present context of great geopolitical uncertainty and speculation on the oil markets, but above all they are a product of long-term structural tendencies. The first of these two factors results from the coincidence of limited output owing to a lack of investment in the capacity of production and from growing demand on the part of emerging countries, not offset by any drop in consumption in the industrialised countries. The latter is due to the fight against climate change with an eye to the ’post-Kyoto Protocol’ scenario, which will inevitably force up the price of energy derived from fossil fuels (coal, oil and gas).

b) The rise in oil prices is a structural phenomenon with major social and economic fallout, and it will impact on the poorest members of the population, both in Europe and in the rest of the world. The situation in developing countries is particularly worrying, since their lower capacity for production makes their energy intensity twice as high as that in their more industrialised counterparts. For instance, the International Energy Agency estimates that, one year down the line, a $10 rise in the price per barrel would cost Argentina 0.4 points of its GDP and sub-Saharan Africa 3 full points.

c) Of course, the impact on Europe’s economy will be less serious than the oil crises of 1973 and 1979, because those events were followed by a cycle of technological innovation geared towards improving energy efficiency, namely in industry, in cars and in the home. Thus it now takes 40.7 units of oil to constitute one unit of GDP, as against 100 in 1973. But Europe did not persevere in its efforts, for whereas back in the 1990s energy efficiency was still being improved by 1.4 % per annum, this rate has since declined, plateauing at an annual rate of only 0.5%. Short-sighted transport policies geared primarily towards promoting road transport have prompted serious congestion, which is not only placing a serious burden on the environment, but is also one factor undermining road safety.

d) Nonetheless, the impact is very real. The rise in oil prices is directly affecting the living conditions of workers, jobseekers and pensioners and could affect the poorest households’ ability to heat their homes this winter. By decreasing workers’ purchasing power, this trend is jeopardising what is already weak growth in Europe at a time when domestic consumption and investment are insufficiently dynamic.

e) The difficulties caused by the price of oil are intrinsically linked to the problem of climate change. The great majority of greenhouse gases emitted by the European Union derive from burning oil. And whilst in the Kyoto Protocol the Union pledged to cut its greenhouse gas emissions by 8% between now and 2012, it is currently falling well short of this target, and consequently has some serious catching up to do.

2. Key elements in Europe’s response

ETUC believes that the situation resulting from the high price of oil necessitates a coordinated response by the EU Member States, a raft of measures designed to rise to all these respective economic, social and environmental challenges. In ETUC’s view the efforts made must focus on three key objectives:

a) Adopting immediate transitional measures

ETUC is mindful of the difficulties faced by vulnerable professions and households as a result of the rise and the instability of the price of oil and recognises the immediate need for transitional aid designed to make sure that some of the fiscal surpluses generated by the surge in oil prices find their way back to the most destitute consumers and badly affected transport companies. The oil companies that are making substantial profits from the rise in the price of oil should also make a contribution.
But such measures do not solve everything. The long-term trend of rising oil prices and the problems it causes, as much for consumers as for industry, require economic policies and energy and transport policies that are more structural.

b) Coordinating European economic policies more efficiently
ETUC is calling for consultations between the European social partners and the European Central Bank (ECB) on immediate responses to the problems caused by higher oil prices in the form of pay and monetary policy measures. If this consultation process is to guarantee sustainable economic growth within the euro zone, they must seek to avoid two pitfalls: firstly, erosion of workers’ purchasing power as seen against the current backdrop of competitive wage undercutting in Europe, and secondly any rise in ECB interest rates.
Moreover, if the Member States are to become insensitive to fluctuating oil prices and capable of withstanding climate change, the European Union, Member States and companies will all have to make consistent, long-term investments in education, research and development, in furthering advances in renewable energies and their use (hybrid and electric vehicles), and in improving public transport infrastructure and energy efficiency in buildings.
ETUC is calling for more extensive harmonisation of the European energy taxes that could be channelled into an energy transition investment fund. Furthermore, ETUC is demanding the establishment of a European framework for fixing prices for the use of transport infrastructure. The aim here is to enable actual external costs to be factored into the equation, as provided for in the 2001 White Paper entitled "European transport policy for 2010: time to decide". Moreover, it should be possible to use some of the revenue generated by this pricing system to improve the application of labour legislation in the road transport sector.

c) Pursuing a genuine common European energy strategy, based on saving energy and diversifying our sources of energy

The European Union must set itself some ambitious goals for the development of renewable energies, which are currently underused in spite of having considerable potential. The Union needs to shift up a gear, revising its 2001 directive on the promotion of electricity from renewable energy sources in such a way as to fix binding targets in the long run for the proportion of generated power in the Member States derived from renewable energies.

Nonetheless, substituting other energies for oil would only solve half the problem of dependency and the objectives of the Kyoto Protocol. Massive efforts in improving energy efficiency need to be made, above all in transport and buildings, which respectively account for 70% and 20% of all oil consumption in Europe.

ETUC urges the Union to adopt a robust renovation programme for its social housing. This would enable energy savings, create jobs, reduce household energy bills and boost competitiveness in exports of renewable energies, a sector in which Europe is the world leader.

Furthermore, the adoption of the proposal for a directive on energy end-use efficiency and energy services has to be made a priority and impose binding specific objectives for improving energy efficiency, since this could also potentially create new jobs.

Lastly, the European Commission should intensify the Community’s assessment and step up its monitoring of the European markets for oil and gas in a bid to create greater transparency.