Natural gas and electricity prices to continue to rise, expert says

An energy expert told soL that the limited natural gas hikes sold to houses and commercial and industrial uses might be to prevent potential popular reactions before the local elections expected in 2019
Thursday, 02 August 2018 21:49

The increase in the prices of energy raw materials, especially oil, and the rise in exchange rates will lead to the continuation of the increases in the prices of electricity and natural gas, an energy expert told soL news.

Turkish state pipeline operator BOTAŞ raised the price of natural gas used for electricity production by 49,5 percent, for residential use by 14 percent from August 1 due to a weaker lira pushing oil and natural gas prices higher. BOTAŞ said it had also raised natural gas prices for commercial and industrial uses by 14 percent. 

Energy Market Regulatory Authority (EPDK), the Turkish energy watchdog, also announced that it hiked electricity prices for industrial use by 14 percent and for residential use by 9 percent effective from August 1.

Sanctions on Iran, the major oil supplier country of Turkey by 2017, are likely to push up oil prices as the US retreats from the nuclear agreement, it is still uncertain whether Turkey will receive another exemption from the sanctions.

Moreover, approximately 10 billion cubic meters of natural gas (worth over $2 billion) enters Turkey annually through Iran via the pipeline. Even though Turkey meets the biggest part of its natural gas need each month from Russia with nearly 1 billion cubic meters, it doesn’t seem possible for Turkey to give up on Iran’s gas.

The expert told soL that the limited natural gas hikes sold to houses and commercial and industrial uses might be to prevent potential popular reactions before the local elections expected in 2019.

The increase in the price of natural gas sold to the electricity producers raises the cost of electricity generated and creates pressure on electricity tariffs. Before the last hike, natural gas prices increased by 15 percent in 2018, while electricity tariffs increased by 11 percent.

The increases in the price of natural gas and the exchange rate led to a 50 percent rise in unit electricity generation cost compared to the previous year. However, the increase in electricity sales tariffs remained at 22 percent in households and 27 percent in the industry. Therefore, increases in electricity tariffs are expected to continue.

On the other hand, Turkey at the end of the year in parallel with the increase in oil prices of $245, in the present case the cost of gas imports are expected to exceed $300. It is inevitable that the rise in energy costs and exchange rates will lead to hikes in electricity and natural gas tariffs paid by the citizens as well as in the chain of inflation.

Turkey’s lira slid to a record low beyond 5 to the dollar and stocks fell on Thursday, after the United States imposed sanctions on two of President Tayyip Erdoğan’s ministers over the trial of a US pastor accused of backing terrorism.