Skyrocketing oil prices sparked protests in Asia and Europe, resentment amongst drivers and politicians declaring their worries and good will to learn from each other how to save energy at the G8 energy ministers’ meeting in Japan last weekend. Many countries suffer from higher costs for energy and food, the weak dollar, the strong euro and high inflation in addition to slumping demand from the U.S. Especially European economies suffer from the strong euro’s impact on exports. Nevertheless, remarks such as the one of Spain’s Prime Minister Zapatero who has criticized the ECB’s president Jean-Claude Trichet and advised him imprudently to be “more careful in his comments.” are not justified and should be denounced immediately. Spain suffers – like the entire euro zone – from the strong euro, but the ECB’s responsible monetary policy combats high inflation and is not to be blamed for the misery of the Spanish economy. The Spanish housing bubble popped due to the credit crisis, the spike in fuel costs (whose impact is diminished by the strong euro), the construction of hundreds of thousands of illegal homes and housing supply exceeding demand. Even if the expected rise in interest rates in the euro zone causes the USD to sink further and oil prices to climb, the ECB has to focus on price stability and fortunately is independent from the influence of governments which are looking for culprits for the current unpleasant development.
And those governments subsidizing fuel to offset the skyrocketing prices will finally have to accept that there’s no alternative to changing our way of life. India and Malaysia have already cut their fuel subsidies sparking severe protests. Spanish truckers are on strike to prompt their government to take action against high diesel prices. South Korea’s $ 10 billion package to ease the impact of high fuel costs on low-income citizens will just delay the burden and it’s questionable whether the effort is worth the money. South Korea which spends its tax revenue surpluses on subsidizing gasoline should consider whether the money wouldn’t be more useful if spend on broad investments in energy saving technology instead.