Turkey’s unenviable status as Europe’s highest payer for gasoline was further strengthened on Thursday when a new government hike pushed the price of gas up a further 10 kuruş (6 cents).

The decision pushed the average price of one liter of unleaded gasoline to TL 4.76 (2.02 euros) nationally, while in İstanbul, gas prices were at an average of TL 4.83 (2.05 euros), various media outlets reported on Thursday.

The newest hike puts added pressure on Turkish consumers, who saw several rounds of fuel hikes — along with hikes on other consumables, natural gas and electricity — in 2012. The increase in already historic prices has pushed Turkey further, even past Norway, which routinely trades places with Turkey for the highest pump prices. In Norway, a liter of unleaded fuel cost 1.972 euros on Thursday, said one European fuel monitoring service, six euro cents less than in İstanbul.

Falling global oil prices has somewhat dampened the effect of rising prices in Turkey, which saw a Europe-wide record of TL 4.83 (2.08 euros) a liter in October.

The staggeringly high price followed two tax hikes the month before which pushed up the price of gas by 35 kuruş in the space of two weeks. Those hikes, coupled with Thursday’s and several other rounds in 2012, have pushed the proportion of tax in fuel prices to just above 60 percent.


The move may seem paradoxical for a government trying to spur growth in Turkey’s manufacturing- and transport-driven economy, but worries over the country’s energy import-drive trade imbalance have led Ankara to take what it sees as “unwanted, but regrettably needed measures,” says Ercan Uygur, an economics professor at Ankara University. “The country’s trade imbalances are why Ankara wants to keep gas use as low as possible.”

Turkey imports over 98 percent of its petrol from abroad, and the government estimates it will spend $60 billion in 2013 paying for gas and oil from Russia, Iran, Iraq and other countries in the region. Ankara’s other, more manageable problem is a budget deficit, which it has sought to plug with rapid tax increases on consumables. Ankara has struggled to plug its revenue hole in more conventional ways, as tax evasion remains a widespread practice in a country where just under 40 percent of the economy escapes even the trappings of government regulation.

In mid-November of last year, Deputy Prime Minister Ali Babacan stated that progress was being made on reducing tax evasion, promising an increasingly incredulous press that taxes on consumables would be rolled back once the informal economy was clipped. According to the own minister words, however, the cost will be high in the meantime. In 2011, the minister suggested that every $10 hike in the price of a barrel of oil would increase Turkey’s annual inflation rate by 0.5 percentage points. Though inflation has remained low since mid-2012 because of a record low food prices, rising transportation costs are likely to “push a round of inflationary secondary effects,” said Uygur.

The secondary effect on prices notwithstanding, the cost of gasoline is undoubtedly putting a strain on consumers. Thursday’s TL 4.76 (2.02 euros) per liter price — which translates to $10.17 a gallon — means that just four liters of gas will be equal to almost half of the average Turkish daily salary of $22.

Source Zaman.

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