France Unveils $512 Million Aid Package as Fuel Prices Crush Small Business

France will spend an estimated 450 million euros (around $512 million) on a new aid package for households and businesses hammered by fuel prices that have spiked since the start of the Iran war on Feb. 28.

The package, announced this week, includes subsidies for people who commute at least 15 kilometers (9 miles) to work and support ranging from 48 euros to 277 euros ($54 to $315) to help 5.8 million families pay their winter energy bills.

The measure targets an energy shock that is biting hardest in rural France, home to roughly 21 million people — about a third of the population — across areas that make up nearly 90% of the country's territory. Public transportation there is limited, so residents depend on cars.

The economics are stark at the bakery run by Kevin and Sandrine Luce in Saint-Just-en-Chaussée, a small town about 90 kilometers (55 miles) north of Paris. In March, when the couple first fired up their fuel-heated oven, they paid 2,230 euros ($2,540) for 2,000 liters (528 gallons) of heating oil. Last week, they spent almost the same amount on just 1,200 liters (317 gallons).

"Originally, it was a good deal, because initially, a fuel-heated oven is more economical than an electric one," Kevin Luce said. "That is until the price (of fuel) increased by 50%. So, yes, now it's not a good deal."

The Luces are far from isolated. France has more than 34,000 bakers producing around 6 billion baguettes a year, according to the national federation of bakeries and patisseries. About one quarter of them use oil- or gas-fired ovens.

"All this superfluous expenditure on energy represents a loss of earnings," Luce told The Associated Press. "It's salary we can't take, it's salary increases we can't give to our employees. It's investments we can't make."

The price surge carries political weight for President Emmanuel Macron's government. The yellow vest protest movement, which rocked Macron's first term, drew wide support in rural towns and villages, with demonstrators camping on roundabouts for months, some of the rallies turning violent. Fuel prices were one of the triggers of that anger — a memory that hangs over ministers now.

Mobile businesses squeezed

Martial Realland sold his home to fund a food truck that he drives from village to village in the l'Oise region of northern France, selling ham and cheese pancakes, fries and other snacks. Filling the truck with diesel now costs 200 euros (around $228), up from 120 euros ($136) before the Iran war, he said.

"It really hurts," he told the AP. "It's catastrophic."

Realland said he is already turning down work that requires a long drive because the diesel cost makes it unprofitable. Winter adds another threat: his rented home runs on heating oil, and he estimates that filling its 1,500-liter (396-gallon) tank could cost 2,500 euros ($2,847), against 1,600 euros last year. He may not fill the tank at all this season.

"I'm scared" of that bill, he said.

Political pressure from the right

Christine Loir, a National Assembly lawmaker from the National Rally party of far-right presidential hopeful Marine Le Pen, said more than 10% of homes in L'Eure, the Normandy region she represents, use heating oil. Many of those households cannot afford to install other heating systems or better insulate their homes, she said.

Loir is lobbying the government to cut taxes on heating oil, which is widely used in rural homes and enterprises, including some bakers' ovens. She said constituents have told her they will have to choose between heating and food this winter.

"People are extremely worried," Loir told the AP. "People say that if fuel prices don't come down, they'll stop going to work, they can't cope."

One baker holds the line

At the Luces' bakery, at least, customers will not bear the cost. A basic baguette stays at 1 euro (about $1.14); a "traditional" baguette, which takes longer to make, stays at 1.10 euros ($1.25).

"I won't change my price," Kevin Luce said. "It wouldn't be of any help. It wouldn't soak up the lost revenue and it would be counterproductive, because our customers would feel betrayed. They shouldn't have to pay more. They're already paying enough at home."

With winter approaching and the government's 450-million-euro response measured against a 50% fuel price surge, the question facing Paris is whether targeted subsidies can contain anger in the rural towns that once fueled the yellow vests.