Monday, June 9, 2008

Fuel Strike In Spain

Spanish Semi-TruckIn response to high fuel costs truckers in Spain have decided to go on strike. The truckers want the government of Spain to pass a law establishing a minimum price for their services, and to make sure that their contracts better reflect the fluctuating cost of fuel, which has risen by more than 20 percent since the beginning of the year, according to BBC News.

This fuel strike, which involves around 90,000 drivers--most of whom are self-employed--has the potential to cause some serious problems for Spain and its inhabitants. Already people are lining up at grocery stores and gas stations around the country, trying to get as many supplies as they can before stores start running out of goods. The striking truckers have warned the public that stores will only be able to last a couple days, according to the BBC article.

The truckers know that the country can’t run without them and they are making their voices heard, but are they going to be successful in their campaign? Part of the problem is that the Spanish government has a limited number of options available to it thanks to its arrangement with the EU. For example, it is required by the EU that member countries place at minimum a 15 percent value add tax (VAT) on fuel. In addition, the EU restricts the use of certain fuel subsidies, according to the BBC.

What the truckers want is more money to account for the business cost increase of more than 20 percent, and one way or another, they are going to have to get it. "We have no more solutions. We can't afford diesel any more. It's as simple as that," Jean-Claude Ferrand told Spanish national radio, according to the BBC.

If the government can’t offer subsidies what they might have to do is help negotiations between the truckers and the suppliers. Ultimately, either the government offers a subsidy or the suppliers are going to have to pay more to have their goods delivered. Looking at the options available it appears that likely the suppliers will be the ones fronting the costs, which of course will be represented in price increases and in the end borne by the consumer. Either way, though, it was going to come down to the consumer; they were going to pay for it either through their tax dollars or through increased goods prices.

Spain is making the headlines now, but with the way fuel costs keep rising, they are unlikely to be the last ones with this problem. Look for more and more truckers to substantially raise their prices or go on strike--or else out of business. Either way, supply and demand pressures are going to push prices higher to account for the increase in transportation costs.

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