The increase is wreaking havoc with the profit margins of many businesses. Activists from British organization The Fuel Lobby are threatening to blockade British refineries to protest the prices, demanding that the government reduce the value-added tax levied on fuel; other activists demand that the government ensure the stability of fuel prices for at least six months so that firms can properly plan their budgets.

Fuel prices in Britain are possibly the highest in Europe, but even in the United States the price of gasoline has risen to an unusually high $3--4 per gallon (equivalent to Kč 18.5--24.7 per liter). According to a recent CNN/USA Today/Gallup poll, 79 percent of Americans believe these recent price rises are unjustified and are tantamount to profiteering.

In the Czech Republic, the price of the most popular gasoline brand has reached Kč 35 per liter. But as the economist Jan Hošek explained in Britské listy, there is absolutely no reason for these price increases -- just as in the United States, they amount to shameless, opportunistic profiteering.

It's true that the price of oil imported into the Czech Republic has gradually been increasing. At the end of 2004 it was Kč 900 per barrel; the price is now more than Kč 1,400 per barrel. But this gradual increase has been duly reflected in the correspondingly gradual price increases at the filling stations.

When Hurricane Katrina hit the Gulf Coast of the United States at the end of August, world crude oil prices were not particularly affected. On Aug. 31, days after the hurricane first hit, the price of West Texas Intermediate oil dropped from its historic maximum of $69.81 per barrel to $68.94; by Sept. 2nd, the price had decreased to $67.57. The Czech Republic primarily imports oil from the Urals, and saw little price impact from the hurricane. And, since the beginning of August, the Czech crown has strengthened against the dollar. In July 2005, the average gasoline price in the Czech Republic was Kč 29.50 per liter; fuel suppliers can not justify raising prices by more than 90 hellers since then.

Even Czech politicians are confused by the soaring prices. ODS MP Vlastimil Tlustý said on television that "because of the consumer tax, the state is earning more and more from the gasoline price rises, and it's necessary to lower this tax." This was gross misinformation. Consumer taxes are unrelated to gasoline price increases; the Czech consumer pays Kč 11.84 in consumer tax per liter of gasoline, regardless of the price. Does Mr. Tlustý think that the state is earning more from the consumer tax because Czech consumers are buying high-priced gasoline? There's no other explanation for his statement.

Even though the current gasoline prices are the result of profiteering, the dependence of the Czech economy on unstable oil prices could become a serious long-term problem. There is considerable uncertainty about the extent of global oil reserves; some highly regarded oil-industry specialists warn that world oil production will peak next year before going into decline. Apparently, oil companies have been exaggerating the size of their oil reserves for commercial reasons. If so, the current instability could become permanent and even the Czech Republic will have to look for alternatives. But serious discussion of this subject has yet to begin.

Originally published in Czech Business Weekly HERE