Why the oil price decline is failing to boost Europe

Forget quantitative easing by the European Central Bank. Surely the precipitous oil price decline in the last couple of weeks will finally be the catalyst to give the down-trodden European economy the big boost it needs. I mean, after three years of prices north of $100 a barrel surely a big cut in the European energy bill will provide the stimulus effect that ECB President Mario Draghi could only dream of? Well, I'm afraid it appears there will be no energy-induced bonanza as, like many other peculiar aspects of the European economy, consumers will hardly see the benefits of market falls in commodities.

To recap, the likes of OPEC are only getting circa $90 per barrel for their oil nowadays compared with around $107 per barrel as recently as June this year. So you could be forgiven for thinking that if the producers are getting less bang per barrel then the consuming nations of Europe would be a major beneficiary. Well that's not quite the case it seems.

Oil gas derrick
Getty Images

Yes, the big red top headlines talk of the 'a couple of pence per liter' off pump prices but the major benefits will never come our way in Europe. Why? Simple. Europe is overwhelmed by taxation, subsidy, over-capacity and green incentivization plans that have conspired make hydrocarbons a dirty and expensive source of energy.

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Europe's biggest economy, Germany, is at the heart of the issue in its noble pursuit to reduce greenhouse gases. Great ambition but stunningly expensive. By 2050 the Germans want to have 60 percent of their energy coming from renewables. This will be an impressive feat but may well seriously dent European competitiveness further.

Daniel Lacalle, Senior Portfolio Manager at Ecofin is worried. "Since the beginning of the crisis in 2008, average European power prices are up 38 percent whereas wholesale prices have actually fallen. The problem is that we don't see any of the benefits in Europe of the lower oil prices as we subsidize too many energy industries, we have oversupply and subsidies. In addition, there are so many green taxes that gasoline prices have been going up instead of down."

According to Lacalle German SMEs are now paying twice the price for energy as their U.S. counterparts.

Read MoreWhy the crude oil crush could accelerate

The oil producers are also at pains to point out that it's not their fault that pump prices are so high. OPEC has for years tried to blame governments in Europe and elsewhere for taking too large a slice of the overall price of gasoline. OPEC has a lovely chart on its website where it gleefully shows that U.K. taxes on a liter of oil equate to around 58 percent of the total cost (2013 data). In Italy the figure is around 55 percent, in Germany over 50 percent. Compare this to the U.S. where taxes account for only 14 percent.

So, yes we can all celebrate the oil price slump as a boost for many parts of the world economy, but for European industry and consumers the gains will be limited at best it appears.

- By CNBC's Steve Sedgwick