Government blames world oil markets as anger over hikes grows

Government blames world oil markets 
   as anger over hikes grows

November 04, 2008, Tuesday/ 18:06:00
Finance Minister Kemal Unakıtan asserted while speaking in Ankara yesterday that the recent hike in natural gas prices was not because of the government.

When asked about the large price increases of natural gas since the beginning of the year, he responded by saying although it was uncomfortable implementing such hikes, it was a necessary action because of the way natural gas is priced. “The current increase in oil prices will affect the price of natural gas within six to nine months’ time; it is possible that the government will decrease the price of natural gas in the coming months,” he noted.

Mentioning the automatic pricing system that the Supreme Planning Board (YPK) had implemented in July to adjust prices, Unakıtan underlined that the hike mainly resulted from external factors, namely price increases in global markets. He also underlined that although consumers will be negatively affected, the situation had been exaggerated. “People will not spend all of their money on natural gas. This is only a small part of what they spend their money on,” he noted.

In addition, Unakıtan said the hike had no relation to debt owed to the state-owned Turkish Pipeline Corporation (BOTAŞ). “We should not confuse any debts owed to BOTAŞ with the cost of natural gas,” he noted. Unakıtan said there were many businesses which rely on natural gas and that it is possible the cost of goods will increase in the coming months.

Foreign Trade Minister Kürşad Tüzmen spoke yesterday amid reactions against the increase in natural gas prices. “The price of natural gas goes up or down in line with the price of oil. The recent fall in oil prices will be reflected in our calculations only in four months’ time. A price cut can be made in the future,” he said.

Speaking in Bolu, Tüzmen said he did not like the latest price hike but that they had to reflect increases in the price of oil in natural gas prices. “We are not happy to see such hikes; however, we are trying to do our best to avoid further increases. We will lower prices once the situation in the global markets improves,” he noted.

He also underlined that the government placed the utmost importance on Turkish exports and that they would not like to see potentially damaging price hikes which will increase input costs and hurt exporters.

Energy and Natural Resources Minister Hilmi Güler explained that there was a special pricing method for natural gas in global markets and they had to follow it the same way as the rest of the world. “There is a huge natural gas market in the world amounting to $1.5 trillion. Turkey, importing 97 percent of the natural gas it uses, constitutes only 2 percent of this market. The market has its own rules, and we must operate in accordance with these globally accepted rules,” Güler told a press conference yesterday, held jointly with the general manager of BOTAŞ, Saltuk Düzyol.

Güler also underlined that BOTAŞ was also subject to the “rules” of the global natural gas market. “One should not confuse natural gas with that of oil or other energy sources. Some people are trying to turn the issue into a political tussle. They lack information and they are misinforming the public,” he noted. Güler noted that he had not originally planned to attend the press conference but he had seen that the issue was becoming rather politicized and he had decided to come to the conference to speak about the problem. He stressed that BOTAŞ has been a very successful corporation. He also underlined that they had tried their best to make the price increase as low as possible to protect low-income households, stressing that the government will not hesitate to decrease prices once global markets recover.

In related news, Greater Ankara Municipality Mayor Melih Gökçek has reacted harshly to recent criticism that the natural gas price rise had resulted from the fact that BOTAŞ could not collect debt owed to it by the municipality. He said yesterday that the municipality had nothing to do with the price rises. “We owe only $500 million to BOTAŞ; they have $7.5 billion in assets. I don’t understand why we are being blamed for their mistakes,” he said.

Similarly, officials from the Başkent Doğalgaz Dağıtım distribution company, which currently controls gas distribution in the capital, asserted yesterday that the company had no control over the price hikes, claiming that they made no profit out this situation.

Deputy Prime Minister Nazım Ekren said the price of natural gas had changed because of international contracts Turkey had signed to buy oil and natural gas. Ekren yesterday explained that the deals Turkey signed were fixed at the prices when they were signed.

Consumers Union (TÜKEDER) President Necati Yentürk said yesterday that goods and services will become more expensive with this rise, underlining that natural gas plays an important part in people’s lives. “A significant proportion of electricity in Turkey is produced by natural gas plants, so we are likely to see a hike in electricity prices in a short time. Likewise, inflation rates will necessarily increase as well,” he noted.

Eskişehir Artisans and Craftsmen Union (EESOB) President Ekrem Birsen yesterday said the latest price hike in natural gas should be abandoned by the government. Birsen asserted that the global financial crisis had recently eased and the global markets had begun to recover. “We would like to see the government ease the burden on Turkish consumers by canceling the recent price hike,” he noted.

Prices are fixed by the YPK, and the government does not intervene in its decisions. The YPK implemented an automatic pricing system in order to make price changes fairer and more transparent, changed in accordance with inflation and changes in oil prices, the stock exchange and interest rates. The price of natural gas is adjusted monthly, with gas prices falling if oil prices decrease.

With the latest rise, the price of natural gas has increased by 22.5 percent for household consumers and by 22 percent for commercial users. The cumulative price increase since the beginning of the year now totals almost 75 percent, meaning a consumer who had a monthly gas bill of YTL 100 last year will pay YTL 175 this winter for the same amount of natural gas.

In the meantime, three members of Parliament, one from the Nationalist Movement Party (MHP) and two from the Republican People’s Party (CHP) have taken the issue to Parliament. Osman Kaptan and Hüsnü Çöllü from the CHP and Hasan Çalış from the MHP have directed their questions about the price hike to Prime Minister Recep Tayyip Erdoğan.

Furthermore, some officials informed Reuters yesterday that the latest price hike in natural gas will lead to a price increase in electricity as well. The officials asserted that they expected at least a 10 percent increase in electricity prices beginning in January 2009. Dams in Turkey are, on average, filled to about 29 percent of capacity and in the coming months, natural gas will be increasingly used to produce electricity. “This directly affects costs and increases them,” they noted.

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