Natural Gas Controversially Hikes Starting from April 1st

 The decision for a price hike in natural gas that stunned Turkish consumers came from Energy Minister Taner Yıldız on a TV program.

Turkish consumers would give anything to hear that Sunday’s hike in natural gas and electricity retail prices was only an April Fool’s Day joke; however, governments in Turkey play tough when it comes to energy pricing.

As anticipated, it did not take long for a new wave of energy price hikes to follow Thursday’s 2 percent increase in the price of gasoline, when 18.72 and 9.26 percent increases in natural gas and in electricity prices, respectively, were announced on Saturday. The new hikes are valid starting Sunday, April 1.

The decision for a price hike in natural gas that stunned Turkish consumers came from Energy Minister Taner Yıldız late on Saturday on a TV program. Elaborating on this announcement, a written statement from the state-owned Turkish Pipeline Corporation (BOTAŞ) on Saturday said the price of natural gas for end-users (households) will increase by 18.72 percent. This means a consumer who used to pay TL 250 ($142.51) for natural gas per month will have to pay TL 296.8 ($169.19) following the latest price increase. The minimum wage paid to nearly 5 million workers in Turkey currently stands at TL 701 ($392.5).

Natural gas prices in Turkey are determined in accordance with changes in oil prices and foreign exchange rates. The BOTAŞ statement cited a “necessity to revise natural gas prices amid global oil price hikes and the Turkish lira’s losing value against foreign currencies.” Turkey imports almost all of its oil in US dollars, meaning natural gas prices are therefore also dependent on crude prices and the value of the American currency. The greenback has strengthened against the Turkish lira from below TL 1.75 ($ 1) on Feb. 19 to its present level of more than TL 1.78 ($1.01). The price of a barrel of crude oil, likewise, jumped to $105 from below $100 in a month.

BOTAŞ delivers natural gas to households via private distribution companies that reflect the service cost and taxes (defined by the Energy Market Regulatory Agency [EPDK]) on the final price for subscribers.

Natural gas accounts for almost 50 percent of Turkey’s electricity generation, according to data from the Ministry of Energy, a larger share than other major resources. Natural gas prices in Turkey are fixed to global oil prices; any fluctuation and price hike in world oil markets means an increase in electricity prices. Intermittent supply failures from exporting countries during the winter pushed Turkey’s natural gas conversion plants that produce electricity to switch to secondary fuels (diesel and fuel oil) to avoid power cuts across the country. The government, back then, said it did not expect an increase in household electricity prices.

Separately, the EPDK announced on Saturday that electricity prices for households per kWh will increase by 9.26 percent and by 8.71 percent for industrial use. The decision was announced after an appeal by the Turkish Electricity Trading and Contracting Company (TETAŞ) to pass on the rising costs of electricity generation to retail prices. The EPDK cited the increasing cost of electricity generation as the reason for the latest hike. Officials from the EPDK said the monthly electricity bill of a family of four increases by an average TL 4.50 ($2.57) to TL 48.8 ($27.82) with this latest hike. Yıldız on Saturday said the government had no other options but to reflect the increasing oil input costs on natural gas and electricity. “We are not introducing these hikes, but we had to make this decision after long deliberations on developments in global energy markets.” The minister said the amount of money Turkey paid for a barrel of crude skyrocketed to $122 from $22 in the past 10 years. He said the devaluation of the Turkish lira against the US dollar meant an additional 17 percent rise in the country’s oil import tariff. Turkey produced a total of 228.4 billion kilowatt hours of electricity last year, with 45 percent of this generated by natural gas conversion plants.

The ongoing political instability in the region was also among the factors Yıldız cited as responsible for the latest price hikes. “In addition to surging crude prices, political tension in North Africa, Syria and between Iran and Israel make energy prices jump even higher. … These are the major reasons behind price hikes in Turkey — not a failure in supply or a decline in demand,” he explained.

Reactions from NGOs and opposition parties on Sunday followed the minister’s remarks. Turkish Tradesmen’s and Artisans’ Confederation (TESK) President Bendevi Palandöken criticized the government in Ankara on Sunday for “increasing energy prices arbitrarily.” Citing a “high” value-added tax (KDV) on energy as a major burden on end-users, Palandöken called on the government to reduce the KDV to the 1 percent level.

In a written statement on Sunday in Ankara, Faik Öztırak, the deputy head of the main opposition Republican People’s Party (CHP), compared the latest price hikes to an “April fool’s joke.”

Recalling that Turkish consumers pay one of the highest rates in the world for oil, Öztırak accused the government of failing to manage global energy market developments well at home. The pump price of a liter of gasoline is 2.24 euros ($2.99) in Turkey, while it is 0.85 euros ($1.13) in Syria, which is on the verge of civil war, and 1.74 euros ($2.32) in Greece. Is this how the Justice and Development Party [AK Party] government deems itself successful with regard to the economy?” Öztırak asked.

This news has been reported by World Bulletin.