U.S. Retailers Learn From Europe Fuel Crisis

With the petroleum business slowly returning to normal in Europe, retailers in the United States expressed concern that aggressive consumer behavior demonstrated overseas could be an ominous sign of things to come this winter if fuel prices keep rising.

"I think the industry needs to realize that higher fuel costs will have a serious negative impact on American consumers," said Kevin Noon, president K&K Food Marts Inc, Brockport, N.Y. "Whether the situation gets as bad here as it did abroad is questionable, but I expect to see some fallout from higher fuel prices as the cold weather approaches."

In September, truckers and taxi drivers in England protesting high fuel prices formed an impromptu coalition blocking the delivery of fuel to gas stations. The protests brought the country to a standstill for more than a week.

Noon, who operates 11 K&K Food Marts in upstate New York, has watched the cost of diesel and kerosene skyrocket nearly 80 percent during the past 18 months. His big concern is that there will be a similarbacklash by American consumers.

"The one lesson we have to learn from the European fuel crisis is that consumers made a difference by blocking fuel deliveries," Noon asserted.

Currently, the price of kerosene retails at K&K for $1.49, more than 25 cents cheaper per gallon than diesel's $1.75 price tag. The problem is that truckers can cut diesel with kerosene to keep the cost down. If the kerosene is in demand, the state could begin rationing the fuel, keeping homeowners deprived of a necessary home-heating commodity. As supplies become tighter, the price will escalate.

But the high cost of fuel in the United Kingdom is blamed on taxes. Protesters demanded that the government lower prices that average about 85 pence per liter ($4.50 per gallon). About 76 percent of the price goes to the British Treasury. In contrast, only approximately 22 percent of the cost of fuel goes to taxes in the United States.

The results of the strike affected schools, hospitals and emergency services. Because roads were blocked and deliveries impeded, convenience store and supermarket chains reported that they were running out of basic necessities such as milk and bread. Some were forced to ration perishables.

Oil prices this year in the United States have risen to the highest level since Iraq invaded Kuwait at the start of the Persian Gulf conflict in 1990, prompting OPEC to agree to raise output three times. Ron Marr, executive vice president of the Petroleum Marketers of Iowa Association, said that while prices are higher for farmers and truckers nationwide, they are still manageable primarily because farmers are buying diesel tax-free and truckers are passing the cost onto their clients. But if prices keep going up, even these measures may not preclude a call to arms.

"There is a limit to the high prices people will pay, even if it appears they are getting a good deal," Marr said. "The sentiment appears to be 'if we let these prices keep going up without voicing our dissatisfaction, there is no limit to how high prices can go.' Consumers are unlikely to let things get that bad."