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France’s $624 Million Tax on Oil Stocks ‘Blow’to Refiners

A planned tax on fuel inventories will cost French refiners and distributors 500 million euros ($624 million), an industry group said.

“It’s a huge blow to refiners and will directly hit at their ability to compete,” Jean-Louis Schilansky, head of Paris-based Union Francaise des Industries Petrolieres, or UFIP, which represents companies including Total SA and Exxon Mobil Corp. Refiners will be the biggest payers of the proposed tax because they have the largest fuel stocks.

The levy will be a “one-off” imposed this year, Schilansky said in an interview today after industry representatives were briefed about the plan.

The French government is studying a possible tax on oil companies as part of a 2012 budget law that may be considered by President Francois Hollande’s cabinet on July 4. The government is preparing to raise taxes and cut spending to meet deficit-cutting targets as Europe’s debt crisis roils markets.

“I believe such a plan is being studied by the budget ministry” though nothing has been decided, government spokeswoman Najat Vallaud-Belkacem said today in Paris.

Under the plan, companies holding stocks of crude or refined fuel products, including refiners, distributors and possibly transport companies like airlines, will be taxed on the volumes they held at the end of 2011, Schilansky said.

“It will be a percentage of what was on the books,” he said. These volumes are reported to authorities regularly so the tax will be relatively easy to raise, he said.

Election Campaign

It’s unclear whether gasoline pump operators will pass on the tax to consumers, who were promised by Hollande during the election campaign that prices would be capped.

French refinery losses reached a combined 2 billion euros from 2009 to 2011 as overcapacity cut-processing margins, the association has said.

Over the last few years, LyondellBasell Industries NV, Petroplus Holdings AG and Total have decided to stop refining at their plants at Berre, Reichstett, Petit-Couronne and Dunkirk in France due to lower European fuel demand. After these closures, France will have eight working refineries compared with 24 in 1977.

The government and French refinery workers’ unions are trying to find a buyer for the Petit-Couronne and Berre plants.

“We are very angry about this tax,” Schilansky said today. “We understand the state needs money but it has to be careful where it goes looking for it. International operators aren’t going to look too kindly on this tax that comes in the middle of the year out of nowhere.”

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