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TotalEnergies introduces price cap at French petrol stations to avoid social unrest
TotalEnergies introduces price cap at French petrol stations to avoid social
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Copyright © BusinessAMBE 2023Key takeawaysTotalEnergies has capped French fuel prices.Market experts warn that price caps distort crucial supply signals.In a move that departs from the usual behaviour of Western oil companies, TotalEnergies has introduced price caps at its 3,300 French petrol stations. The Paris-based company plans to maintain those limits as long as the conflict in the Middle East continues, according to The Wall Street Journal. The strategy is largely a preventive measure to avoid the kind of widespread civil unrest and mass protests that have paralysed France in the past, such as the “yellow vests” – demonstrations that were triggered by increases in fuel taxes.Financial gains The decision is further driven by the company’s enormous financial gains, with first-quarter profits up 51 percent to 5 billion euros. That wealth has led to political calls for the imposition of windfall taxes on energy companies. CEO Patrick Pouyanné has presented the price caps as an act of national patriotism, although he warned that such subsidies would be unsustainable if the government were to impose a windfall tax on refineries.Arguments against price caps Mainstream economists and industry leaders, including Shell CEO Wael Sawan, argue that price caps are harmful because they distort market signals. They claim that without accurate pricing there are fewer incentives to increase production or reduce consumption, which could lead to long-term instability in supply. Although TotalEnergies operates worldwide, the price protection measures apply exclusively to the French market.Smaller retailers However, the approach has created tensions with smaller fuel sellers. Unlike TotalEnergies, these smaller companies do not own refineries and must buy fuel at market prices, making it impossible for them to compete with the capped prices. Consequently, some operators are seeking legal assistance from the French authorities and are lodging complaints of unfair competition.Follow Business AM on Google News as well Would you like access to all articles? Take advantage of our temporary promotion and subscribe here!© The Content Exchange, source News