As a result of formulas established in purchasing deals with Russia and Iran, a price hike of 50 percent is expected within the next year. The price of natural gas may increase by as much as 70 percent, as it has in the past year, depending on the outcome of talks with Azerbaijan. Azerbaijan wants to increase the price of natural gas it sells to Turkey from the current level of $120 per cubic meter to a level closer to international standards, around $400 per cubic meter. If the price for Azerbaijani gas hits this level, it will result in a massive rise in natural gas prices.
Such radical changes in gas prices cause problems for the Turkish Pipeline Corporation (BOTAŞ), the country’s major gas importer. Last year, for instance, households simply turned off their boilers and installed alternative heating devices to avoid paying extremely high prices. This caused dramatic reductions in natural gas consumption, and BOTAŞ had to pay Iran and Russia for gas it didn’t consume due to the “buy or pay” condition in its agreements with those countries. Given the current situation, the same problem is expected to arise in the year ahead.
The price of natural gas is largely determined by oil prices and exchange rates. Since a barrel of oil seems to be hovering at around $80 nowadays, which is nearly twice as expensive as it was last year, the price of natural gas is also expected to increase.
The government’s profit targets for the State Economic Enterprises (KİT) also play a role in the issue. The requirement to earn at least $2.1 billion in profits leaves BOTAŞ no other choice but to increase prices at the cost of falling demand. Similarly, electricity prices will also likely rise in the new year. The Turkish Electricity Trading and Contracting Company (TETAŞ) will have to increase electricity prices by roughly 3 percent.
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