The rise has brought the pump price of a liter (nearly a quarter gallon) of 95-octane unleaded gasoline up to TL 4.62 from TL 4.55 and a liter of 97-octane unleaded gasoline price up to TL 4.73 from TL 4.62.
Finance Minister Mehmet Şimşek had defended the government’s tax regime after the price per liter of gasoline rose to TL 4.55 from TL 4.45 on March 9, saying Turkey imposes the sixth-lightest tax burden of Organization for Economic Cooperation and Development (OECD) countries on its citizens. He noted that the tax on gasoline had not been changed since 2009 and that while 70 percent of the tax revenue from gasoline sales went to the ministry’s coffers in 2002, this has been reduced to 57.9 percent.
However, even though the tax rate on gasoline prices has not increased since 2002, Turkey’s dependency on foreign energy sources has been causing the price hikes on gasoline, which is traded in dollars and therefore is also dependent on the American currency. The dollar has been strengthening against the Turkish lira since February. A dollar could be traded at TL 1.74 in February but is currently being traded at TL 1.81. In addition, the price of a barrel of crude oil has jumped to $107 from $105 in February. These rises in the exchange rate and the price of crude oil are pressuring the government to increase the cost of gasoline, as every $10 increase in crude prices costs Turkey an extra $4 billion per year.
Fatih Birol, chief economist of the consumer body International Energy Agency (IEA), recommended on Tuesday that Turkey rapidly establish a high number of nuclear plants to reduce its dependency on foreign petroleum and natural gas as the country’s economy is growing quickly, signaling the need for higher energy consumption in the near future. He suggested Turkey should be able to use nuclear and renewable energy together to offset its energy needs. He said: “With growing energy needs, our energy imports will increase as well as the prices we pay, which is a very crucial issue for the country’s current account deficit [CAD]. By building nuclear power plants and using solar as well as wind power, Turkey’s dependency on foreign imports will decrease. Having nuclear power will bring Turkey more say in the region and in the world.”
Because Turkey’s CAD is very sensitive to changes in energy prices, the US sanctions and lobbying activities against Iran due to Iran’s failure to prove its nuclear activities are peaceful has driven up the CAD in parallel to the rise in gasoline prices.
