French government, oil industry agree fuel price cut

PARIS (Reuters) - The French government and energy industry have agreed to cut fuel prices by up to 6 euro cents per litre for three months to help drivers hit by a recent increase in prices, Finance Minister Pierre Moscovici said on Tuesday.

He said the burden of the “extremely substantial” cut would be shared equally between the French state and oil companies with each contributing 3 euro cents per litre.

“This means it will cost 1.50 euro less to put 25 litres in the fuel tank. It’s a substantial amount, especially for people with low revenues or who have to drive a lot,” Moscovici told a news conference after talks with industry representatives.

The decision, which is due to take effect in the next 24 hours, will cost the state at least 300 million euros ($375 million) in lost tax revenues for the period, he said.

Taxes make up about half of the price drivers pay at the pump in France.

According to the UFIP oil industry lobby, a one euro cent per litre cut in fuel tax costs the state 125 million euros per quarter.

Total TOTF.PA supply and marketing chief Philippe Boisseau said the oil company would cut fuel prices in France by 2 euro cents per litre and 3 cents at motorway fuel stations. ($1 = 0.7990 euros)

With dwindling purchasing power frequently ranked in polls as a top concern for the French, President Francois Hollande pledged before his election in May to freeze surging retail fuel prices for three months.

When he took office Hollande found that immediate action was not warranted due to easing prices, although a recent increase has since forced Moscovici to act on the pledge.

Moscovici said the price cut would be reviewed at the end of the three months.

In 2011, the main TICPE fuel tax brought in some 14 billion euros in revenue to the French government, which is struggling to cut its deficit to 3 percent of gross domestic product this year from 4.5 percent in 2011 despite a stagnating economy.

Reporting by Michel Rose; Writing by Leigh Thomas; Editing by Alistair Lyon