Tuesday June 25, 2024

France to allow sale of fuel below cost to combat inflation

This summer's spike in petrol prices has complicated the French government's efforts to control consumer inflation

By Web Desk
September 18, 2023
Drivers line up as they wait at a Carrefour fuel station in Lattes, near Montpellier, southern France on October 10, 2022. — AFP
Drivers line up as they wait at a Carrefour fuel station in Lattes, near Montpellier, southern France on October 10, 2022. — AFP

France's Finance and Economy Minister Bruno Le Maire announced on Monday that the country would lift a ban on below-cost sales in an effort to lower fuel prices and relieve consumer concerns about inflation.

With a draft law set for debate in October, "I hope it will come into force from the beginning of December," Le Maire told broadcaster France 2.

Selling products at a loss has been mostly banned in France since 1963, over fears larger retailers could drive small competitors out of business by offering artificially low prices whose costs they could afford to absorb.

But Paris is extremely sensitive to discontent over rising fuel costs as prices soar -- remembering the massive and sometimes violent "Yellow Vests" protests sparked by a planned new fuel tax in 2018-19, AFP reported.

"This never-before-seen measure will give us concrete results for the French public, without subsidising fuel," Prime Minister Elisabeth Borne said.

"The state can´t bear the cost of inflation by itself, otherwise that will deepen the deficit," Le Maire said Monday.

So far the government has pushed price limits and called on groups to prolong at-cost sales to try and ease the pain, urging major fuel sellers to show "solidarity" towards drivers.

Oil giant TotalEnergies -- which operates one-third of French forecourts -- said it would keep prices for petrol and diesel capped at 1.99 euros ($2.12) per litre into next year.

Ministers have often insisted that higher prices are down to global oil market factors, including Saudi and Russian production cuts, the recent devastating floods in Libya and forecasts of still lower supply in the fourth quarter.

With low-cost petrol mainly a way to bring in customers who go on to buy higher-margin items, large retailers have been calling for the right to sell at a loss -- meeting opposition from smaller service stations.

"My members get 40 or 50 per cent of their income from fuel sales, so if they sell at a loss, I´d give them three months" to survive, said Francis Pousse, president of the Mobilians industry group representing 5,800 independent service stations.

Large groups "can´t keep losing 15 euro cents on every litre of fuel," Pousse added, saying he was "sceptical" of the measure´s effect on purchasing power.

France´s law against selling at a loss got a high-profile outing in 2018 when supermarket giant Intermarche admitted that offers of up to 70% discounts on products including Nutella chocolate spread were not in line with the rules.

The firm was later fined 375,000 euros over the promotions, which triggered scenes of shoving and even fights in several of its shops over pots of the creamy hazelnut treat.