Turkey hikes gas, power prices amid ‘perfect storm’ in global markets

Turkey announced on Wednesday it had raised natural gas and power prices, a move that its energy importer blamed on a “perfect storm” in global markets amid soaring energy costs.

Petroleum Pipeline Corporation (BOTAŞ) said it had raised gas prices for households, industry and electricity production.

The price for households was raised by 30%, BOTAŞ said. The price of gas used in industry was hiked by 40% for those who consume less than 300,000 cubic meters per year and by 10% for those who use more than that amount. Gas prices for electricity production were raised by 16.3%.

This follows a 35% hike in household gas prices in April.

“The public knows well that with the impact of the perfect storm in global and European energy markets consumers have been left exposed to exorbitant energy prices,” BOTAŞ said in a statement.

It said global price rises had not been passed on at the same level to Turkish consumers and the latest hikes were designed to keep the impact on consumers at a minimum level.

Separately, the Energy Market Regulatory Authority (EPDK) raised electricity prices by between 15% and 25%, according to an announcement in the Official Gazette.

Data on Wednesday showed Turkish manufacturing activity contracted for a third month running in May as both output and orders slowed amid muted demand and the ongoing price pressures.

Turkey imports almost all of its energy needs, leaving it vulnerable to big price swings. BOTAŞ has bought billions of dollars from the central bank to cover its purchases.

Soaring world energy costs in recent months have piled pressure on BOTAŞ to hike prices.

The government has been subsidizing a significant amount of utility bills in an effort to soften the burden of soaring consumer prices on households’ budgets, but new price hikes seemed inevitable due to higher global energy prices.

Turkey has opted to keep prices for households steady and hike prices for gas sold to industrial facilities and power plants.

Rising food and energy prices pushed Turkey’s inflation to 69.97% in April, the highest in 20 years, despite tax cuts on basic goods and government subsidies.

Gas price rises were initially seen pushing the consumer price index (CPI) up 50 basis points and the power price hike was seen contributing 35 basis points, according to calculations by three economists. Natural gas has a weight of 1.55% in the CPI, while electricity has a weight of 2.32%.

The cost of Turkey’s energy imports leaped 135% year-over-year in April alone to reach $7.78 billion, official data showed Tuesday, driving the country’s trade deficit up 98.5% to $6.11 billion.

The January-April gap widened by 130% to $32.55 billion, up from $14.15 billion a year ago.

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