Pain at the pump: Turks brace for double-digit gas as lira tanks
The lira fell as much as 1.5 percent to a record low of 9.6625 per dollar on Friday.
Soaring energy prices and a slump in the lira are combining to create an unexpected headache for Turkish gas stations: How to quote double-digit prices at the pump?
The prospect is rapidly becoming a realistic one, especially after the expiry of tax cuts that have prevented the full costs being passed on to motorists.
Gasoline is currently sold at about 7.90 liras ($0.8) per liter, while the more-popular diesel goes for 8.20 liras. Pump prices have increased by 10% for gasoline and 24% for diesel this year, according to a calculation based on prices from Opet, which operates more than 1,700 stations. The lira fell as much as 1.5% to a record low of 9.6625 per dollar on Friday, a day after the central bank eroded its value with a bigger-than-expected interest-rate cut.
Shell, which operates more than 1,100 stations across Turkey, is studying which outlets need to be updated, according to a person familiar with the matter, who commented on condition of anonymity. Opet is also aware of the situation, a person familiar with the company said. The Koc Holding unit will be able to act quickly when prices near double-digits, he said. BP will have the ability to update gas pumps at its more than 750 stations in two weeks, a person familiar with BP’s operations said. All three companies declined to comment when contacted by Bloomberg.
The government waived 46 billion liras ($4.8 billion) in tax income from fuel sales this year to keep pump prices lower, according to a monthly report by the Treasury & Finance Ministry. But the rebates have ended, paving the way for more price increases as lira falls and global crude oil prices rise.
The lira has lost 7.5% against the dollar this month. The currency has weakened 23% this year, the worst performance among emerging market currencies tracked by Bloomberg.
Turkey is poor in hydrocarbon resources and energy imports have traditionally been a major burden for the economy. Last year’s energy import bill was $43 billion, or about a fifth of all imports.