San Francisco Frontiers - TotalEnergies pumps up controversy in France with cut-price gas

TotalEnergies, which pumps crude oil and refines it into gasoline, also has an extensive network of filling stations throughout France, where retail sales are usually dominated by supermarkets selling gasoline at or near cost in order to pull in customers.

But as oil prices shot higher this spring due to the US-Iran war, the highly profitable company announced a cap of 1.99 euros per litre ($2.29 per litre, roughly $8.70 per US gallon), considerably less than national average of around 2.15 euros per litre -- and up to nearly 2.50 euros in others areas, including Paris.

The cap, which has been in place intermittently for the past five months, has already cost the company 250 million to 300 million euros.

While it is a hefty expense, higher oil prices helped the French company double its first-half profit to 11.2 billion euros.

TotalEnergies introduced the cap when political pressure was building to introduce a tax on windfall profits being made by energy companies.

Prime Minister Sebastien Lecornu called on the company in May to put in place "a generous cap".

Its chief executive Patrick Pouyanne has made clear it will abandon the cap if a special tax is put into place.

"There's nothing forcing us" to keep the cap in place, Pouyanne said recently.

"If a tax is introduced, we'll draw our conclusions and TotalEnergies won't have any more price caps," he added.

- Government happy? -

With a presidential election seven months away and France's economic situation worsening, the government is keeping close watch.

"Today, the public authorities are quite happy a private company is doing the job, perhaps in their place," said Jacques Goisque, head of the FF3C trade association that represents a thousand independent service stations.

But their are limits how much relief TotalEnergies can provide.

The most recent jump in fuel prices has prompted calls to demonstrate reminiscent of the so-called yellow vest movement in 2018.

At the time, a plan to increase fuel taxes sparked widespread protests from low- and middle-income workers who stood to take the biggest financial hit, snowballing into a challenge to the economic policies of President Emmanuel Macron.

Macron called Wednesday on the government to tackle the questions about fuel supplies and prices.

Government spokeswoman Maud Bregeon noted that around one in ten filling stations in France lacked at least one fuel, with the vast majority of them TotalEnergies stations.

She said the government would seek to ensure sufficient supplies and gain some regulatory flexibility on refineries.

The goal is "to push prices down as much as possible, or at the very least to keep their increase under control", she said.

- 'Distortion of competition' -

The FF3C group of independent petrol stations lodged a complaint in mid-July with France's competition regulator for unfair competition.

"There is an upstream player with a dominant position that takes advantage of it to set very aggressive prices that are below market levels," the FF3C's Goisque told AFP.

"We can't sell at a loss."

The supermarkets that usually sell gasoline as a loss leader to pull in customers are also furious.

Michel-Edouard Leclerc, head of the leading supermarket chain E.Leclerc, said "refiners are lining their pockets" while it is impossible for retail distributors to compete.

"We can't go any lower that what our prices are today," he said. "We don't have a cent of margin in our filling stations."

More than a dozen filling stations closed over the past weekend on the island of Corsica.

"Despite the efforts of our supplier, our purchase price exceeds Total's retail price by several dozen cents," the stations said in a statement.

They denounced "the state failing to regulate prices", which "allows an integrated group that benefits from considerable upstream margins to dictate, to blackmail, leading to this distortion of competition."

While the price cap has financial costs for TotalEnergies, it pays well in terms of public image for a company that has frequently faced criticism for the low amount of taxes it pays in France in comparison with the profits it earns globally.

The price cap has "above all earned the company a large amount of goodwill among the French," Pouyanne, the chief executive, said recently.

T.Martin--SFF