The practice of comparing each country's fuel sectors is invalid because each country’s product quality, marketing practice and market structure is different, said Niyazi Ilter, secretary general of Turkish Oil Industry Association (PETDER) on Tuesday.
Speaking to Anadolu Agency, Ilter expressed the belief that this type of comparison is inconsistent and recommended that it should be discontinued because of the differences in each country’s fuel sector.
Turkish Energy Regulatory Market (EMRA) has chosen the U.K., Germany, France and Italy as reference countries for Turkey when studying the fuel market mainly due to their regional similarities, he explained, adding that the countries’ fuel prices, market shares and profits are among the components that are compared.
If a component in Turkey’s fuel market is drastically different, then relevant changes could be made to bring them to similar levels.
However, Ilter said that countries’ fuel markets should be considered individually in order to make the best assessment.
He strengthened his case by exemplifying the views of the European Commission, which state that, “comparisons between prices and price trends in different countries shall be carefully made. They are of limited validity,” because of essential differences in the market.
- Why gasoline price does not fall as much as oil price?
Additionally, Ilter also addressed the question of why prices at the gas station do not fall as much as crude oil prices.
“In Turkey, fuel prices are affected by fixed taxes and currency effects,” he said.
While crude oil prices fell by about 75 percent between June 2, 2014 and Jan. 20, 2016, this was reflected in international gasoline prices with only a 60 percent reduction.
Ilter said in Turkey the pump price fell by only 16 percent during the same period, referring to estimates carried out by PETDER.
He argued that this discrepancy is attributed to the currency’s effect; the fact that oil is imported in dollars and sold in Turkish liras.
“In addition, fixed taxes make up 60 percent of fuel prices,” he said, explaining that there is a similar situation in Europe as well.
The U.K., Italy, Sweden and Turkey rank as the four highest countries with fuel tax globally.
“The main issue is not high taxes, but it is the fact that these taxes are fixed,” he argued. When prices fall, the share of tax increases in proportion, he added.
Other components of fuel prices include a sector margin of around 13 percent and product share of 26 percent.
“Because product’s share is only 26 percent, a 50 percent discount on the price of the product translates to an overall price fall of about 15 percent in gasoline,” he underlined.
By Zeynep Beyza Kilic