Rising international petroleum prices are bad news for Turkey, which imports 90 percent of the oil it consumes.
Turkey’s dependence on imported oil has already been key in creating its $86.6 billion current account deficit, and will continue to hold the country back from reaching its full growth potential, according to analysts from three major financial research firms who were quoted in a recent CNBC article.
Turkey’s predicament will worsen as oil prices rise
Any Turk could tell you that the country has an unhealthy dependence on foreign oil. After all, each time they visit the pump, Turks are hit with some of the highest gasoline prices in the world.
But foreign financial analysts note that the squeeze on Turkey is only growing tighter. After all, earlier this year U.S. and EU sanctions were imposed on Turkey’s biggest oil supplier, Iran, forcing Turkey to frantically seek other suppliers, and even setting off an informal gold-for-oil trade business between Turkey and Iran.
Even Turkey’s more reliable sources of oil are expected to raise prices this year. British research firm Business Monitor International (BMI) expects the oil price basket of OPEC (Organisation of the Petroleum Exporting Countries) to rise from $107.52 in 2011 to $111.47 per barrel in 2012.
Of the 670,000 barrels of oil that Turkey consumes each day, approximately 585,000 are imported. The projected rise in the cost of oil is “clearly a risk” for Turkey, according to BMI’s most recent energy report.
In fact, “every $10 increase in average oil prices adds $4 billion to the current account deficit” of Turkey, Goldman Sachs Managing Director Ahmet Akarli told CNBC. Turkey is currently in the period of income growth that most strains a country’s energy supply, according to Akarli, when average annual income is rising toward $25,000.
Cleaner, cheaper options
Turkey might have plentiful oil reserves along its northern coast and under the Aegean Sea in its west. But efforts to explore those areas have been held up by regional disputes with Greece over who owns any discovered resources, much as similar fights have hindered Turkey’s efforts to explore natural gas in the Mediterranean.
It would be more fruitful for Turkey to stop energy leakage and improve energy efficiency, says Akarli.
Turkey also has huge untapped potential on the renewable energy side, adds Frost & Sullivan analyst Enguerran Ripert. In particular, wind energy is a cost-effective and viable resource of which Turkey has plenty, he says. Clean energy companies are also prime targets for foreign direct investment, which Turkey is doing its best to boost.
Will Turkey take the challenge?
It’s no surprise that Turkey needs to lose its addiction to fossil fuels if it wants to be a major economic power.
But the amount it spends on them is truly shocking: according to BMI forecasts, “Turkey’s oil consumption will top 711,000 barrels per day by 2016, with at least 655,000 barrels per day coming from overseas, at a cost of $23.67 billion.”
This latest alarm from a group of international financial experts may just be the wake-up call Turkey’s government needs to get on a healthier, more independent energy diet.
Read more about energy politics in Turkey:
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