Europe does that for a reason, of course. High prices cut demand for oil products and that is good energy, national security and climate change policy. Many Americans advocate the same policy for the U.S. – though not too many of them are holding or running for political office. In a column a week ago, Charles Krauthammer called for a series of 50 cent increases in U.S. gas taxes every six months for the next two years.

But with the price of oil at these levels, even Europe, long a model for people advocating high taxes, is having trouble holding the line on its energy tax policies – and that’s disturbing. In the past month, demonstrations by truckers have rocked Britain, France and Spain. Advisers to the British government say that Prime Minister Gordon Brown has met with a variety of experts, including investment bankers specializing in commodities, in search of a reasonable policy idea that would ease price pressures and tell British voters that he cares. France’s President Nicolas Sarkozy last month proposed a ceiling on the sales tax on fuel so that it wouldn’t keep rising along with oil prices.

Still, there’s hope that governments won’t react to high prices by cutting taxes or increasing subsidies because that will only blunt the supply and demand effect and prolong current market tensions. The French news agency Agence France-Presse reported today that French Prime Minister Francois Fillon rejected the idea of lowering fuel prices, saying the move would “encourage fuel consumption” and would therefore “be a historical misstep.” During a visit to a geothermal power site in eastern France, Fillon said "It would prolong the illusion pending the next hike. I refuse to take this short-term approach."

A short-term approach is exactly what many developing and oil-producing countries in much of the world have done, as discussed in an earlier item here on Energy Wire. Indonesia’s fuel subsidies helped boost consumption there and last month it finally had to withdraw from OPEC because it isn’t exporting anymore.

In the past several weeks, several of those nations have taken the plunge and let its artificially low prices rise to world levels. This could help slow down oil consumption growth in the world’s fastest growing markets. It won’t be easy. India has already faced widespread protests for trimming its fuel subsidies.

Unfortunately, that will probably make it unlikely that China would follow suit – at least until after the Olympics. With inflation rising and the sports spectacular approaching, Chinese leaders will probably want to wait another three months before risking disturbances. And perhaps longer.