TODAY’S – Turkey not reaping benefits of free-falling oil prices

Turkey not reaping benefits of free-falling oil pricesAlthough global oil prices have reached their lowest level in six years, Turkish consumers are not benefitting from the vast drop as prices at the pump remain higher than ever due to heavy taxes, Energy Market Regulatory Agency (EPDK) figures indicate.In 2008, global oil prices shot up to $147 a barrel, only to drop to $40 by the end of the year, and at that time one liter of gas in Turkey cost TL 361.

The current global price stands at $58 a barrel, but Turkish consumers are paying TL 424 at the pump. From July 2008 to December 2014, global oil prices dropped by 60 percent, while a liter of gas in Turkey rose in price by 17 percent.

Meanwhile, taxes on that liter of gas increased by 48 percent in the same period. The US dollar in July 2008 was only valued at TL 122 while it has nearly doubled as of December 2014, reaching record highs of TL 241 before falling to around the 23 mark after the Central Bank of Turkey said it would maintain its tight monetary policy.

Turkey has among the worldand#39s highest gas prices, and taxes are the primary culprit for this, as they currently constitute just over 70 percent of the cost of a liter of gas at the pump. Changes in gas prices affect dozens of other consumption fields, exacerbating the burden on millions of consumers in Turkey in everyday life.

The current taxation system is blamed for the still-high price of gasoline in Turkey, while the government has ignored numerous calls from NGOs, consumer unions and opposition parties for an extensive change in taxation on gasoline.While Turkish citizens are not seeing any direct benefits from falling oil prices in their daily life as much as changes within global markets would suggest, Turkeyand#39s current account deficit (CAD) will be buoyed.

Given Turkeyand#39s dependence on foreign sources of energy, amounting to nearly 70 percent of total usage, each $10 drop in oil prices saves Turkey $4 billion in annual energy imports.A $33 fall in global oil prices could save Turkey $13 billion in annual energy imports, which make up around 16 percent of its gross domestic product (GDP).

SOURCE: Today’s Zaman