French fuel US anger with call for higher petrol taxes

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The Independent Online

A key meeting of finance ministers today is expected to be marred by a dispute between France and the US over French calls for increases in petrol tax to reduce demand for fuel amid soaring crude prices.

A key meeting of finance ministers today is expected to be marred by a dispute between France and the US over French calls for increases in petrol tax to reduce demand for fuel amid soaring crude prices.

France is expected to use the meeting of Group of Seven finance ministers in Washington to push its plan for a global strategy on energy conservation.

France has called for an international tax on air passenger journeys to curb demand for aviation fuel, and use the money to fund an expansion in the world's aid budget. Thierry Breton, its finance minister, is expected to call for countries that have low fuel tax rates to raise their tax rates.

The proposal will anger the US, the world's largest consumer of oil, which has some of the lowest tax rates on fuel in the developed world. The move would be the latest step in France's long-standing strategy of trying to reduce its dependence on oil since the price spikes of the Seventies. But it will be strongly resisted by the US, which believes markets can be left to respond to high oil prices.

John Snow, the US Treasury Secretary, said prices were too high but would moderate as demand and supply adapt. "These prices are out of line and I'm confident there will be adaptations to these prices," he told Bloomberg Television.

Mr Snow said oil prices, which have surged 50 per cent, would be a matter of "intense discussion" at the G7 meeting. The G7 is also likely to repeat calls for more currency flexibility but is not expected to change the language from previous communiqués.

Mr Snow said he was confident China would bow to international pressure to make its exchange rate more flexible. "The Chinese have acknowledged the need for flexibility," he said.

Gordon Brown was also due to arrive in Washington last night. He delayed his arrival after dashing to Birmingham yesterday in the wake of the collapse of the car maker, MG Rover. The Treasury said Mr Brown would push for reform to the oil markets to reduce price volatility by insisting on greater transparency, particularly among members of the oil producers' cartel, Opec.

In a packed schedule, Mr Brown will hold a breakfast meeting with Paul Wolfowitz, the head of the World Bank. He will then use the meeting of the G7 to discuss the mandateministers want Mr Wolfowitz to pursue over the next five years.

He will then meet with Alan Greenspan, the head of the US Federal Reserve, before chairing a marathon session of the IMF's international monetary and financial committee.

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