Why we shouldn't chase cheap fuel

There's panic buying at some petrol stations this weekend as drivers fear imminent price rises or forecourts running dry, due to the blockades in France and Britain. The Deputy Prime Minister, John Prescott, was accused of fearing the wrath of protesters who believe that the £4 gallon is inevitable as he cancelled two scheduled appearances in Liverpool yesterday.

There's panic buying at some petrol stations this weekend as drivers fear imminent price rises or forecourts running dry, due to the blockades in France and Britain. The Deputy Prime Minister, John Prescott, was accused of fearing the wrath of protesters who believe that the £4 gallon is inevitable as he cancelled two scheduled appearances in Liverpool yesterday.

Here we go again, the doomsayers cry. Another oil price "shock" looms as the greedy Opec ministers meet in Vienna this weekend to put the screws on the poor motorist. Already the sticky black stuff is at a 10-year high price of $35 a barrel. It could go up to $40. Our economies will collapse if the relentless rise in petrol prices is not halted.

A persuasive argument, but wrong. As Corporal Jones might have it, "don't panic". In real terms, oil is not that expensive. It is well below its value during the 1990 Gulf War, and has halved in price since the 1981 "shock". Despite the expected price hike, Western inflation forecasts remain fairly low, buffeted far more by the cheap euro than by expensive oil. Oil is a scarce resource, which takes millions of years to form and only seconds to burn - polluting as it does so. Many countries are investing in cleaner alternatives: if this "shock" speeds up the process, that is welcome.

The protests in France are withering, thanks to the French government's willingness to cave in. Those in England and Wales are pointless, since most of the refined oil leaves Ellesmere Port and Milford Haven by pipeline rather than truck. The demonstrators have got the wrong target anyway. Most of the cost of petrol at the pumps is taken in tax. Again, it may not be popular to say so, but we think that's good - so long as the revenue is properly spent.

When the Tories created the "fuel escalator", ensuring yearly rises in the taxation from petrol, a trade-off in terms of better public transport was promised. But the promised improvements that were to follow bus deregulation and rail privatisation have - like so many buses and trains - failed to appear on time, and the Labour Chancellor, Gordon Brown, abolished the "escalator". Mr Prescott's 10-year plan for transport includes many of the same old promises, but we're asked to wait a decade for results.

As Independent on Sunday readers have noted during our Passenger Power campaign, rural motorists are forced to pay through the nose for petrol. They are offered little public alternative to the car. Many of them would welcome the opportunity to "dump the pump", not for one futile day, but for good - if only a cheap, regular alternative existed.

The Government should ignore the cries of the road hauliers, restore the fuel escalator and ring-fence all the revenue to invest in public transport, starting with an immediate boost to frequent, rural bus services.