Gasoline prices in Turkey swell on high taxes despite global oil plunge

Merve Erdil - ISTANBUL

While global oil prices have plummeted, Turkish gasoline prices continue to increase, as recent official figures show that customers are still paying twice or more in taxes than they are for the fuel itself.

The global oil price has fallen down to $35 per barrel, but one liter of gasoline is sold for 4.5 Turkish Liras, although production cost is just around 1 lira. The pump price of one liter of diesel is 3.74 liras, much higher than its production cost at 1 lira. The main reason behind why Turkish consumer cannot benefit from the plunging oil prices is high taxation, according to sector players. The same picture is also the case in Europe. 

Brent prices have slumped to $36.32 per barrel, which is equal to 105 liras on exchange rates as of Dec. 21 in Turkey, where one liter of gasoline is sold for 4.28 liras. 

While oil prices have become cheaper on lira basis by 56.8 percent over this year, the pump price of gas has fallen around 14.7 percent in Turkey mainly due to high taxes in the sector. 

According to November figures of Turkey’s Energy Market Regulatory Authority (EPDK), the pump gas price reached 5 liras after refinery costs, taxes and company profits were added to the product price, which was at 1.04 liras. The state takes around 60 liras out of 100 liras-worth of fuel as taxes. 

According to the EPDK report, the product price of one liter of 95 octane unleaded gasoline was 1.04 liras in November. Wholesaler profit margin (0.04 liras), income taxes (0.00254 liras) and distributor margins (0.43 liras) were added to this amount, as well as taxes (2.84 liras). In other words, a consumer paid 65.3 percent in taxes while buying one liter of gas, worth 4.35 liras, in November. 

The same picture is seen in diesel prices. Consumers living in the European side of Istanbul paid an average of 3.72 liras to one liter of standard diesel in November, even though product cost was 1.07 liras. The share of taxes in one liter of diesel was 2.16 liras. While this share equaled 58.1 percent of the total price, the product cost’s share was 28.8 percent and companies’ profit margin was only 13.1 percent. 

The share of gas taxes are also around 50-70 percent in Europe. 

The income from fuel taxes constitutes around 15 percent of Turkey’s whole tax income. 

Another smaller reason why gas prices cannot be cut in Turkey despite the global oil slump is companies’ high volumes of reserves. Sector representatives claim that Turkish consumers cannot buy one liter of gas at a price lower than 2.57 liras even if the costs other than taxes was be zero. 

A sector representative said the latest update on the special consumption taxes (ÖTV) from fuels was made in 2013 and raises in taxes could be the case in 2016. 

Meanwhile, Brent oil had its lowest price in more than 11 years on Dec. 21, as demand for heating oil slumped on warmer-than-normal temperatures and traders tested for a bottom.