BY ALAATTIN AKTAS
OPEC+, consisting of OPEC (Organization of Petroleum Exporting Countries) and non-OPEC allies, agreed to cut oil production by 2 billion barrels per day from November onwards. The price hike that started before the decision further accelerated on the international commodity exchanges.
Turkey also experienced this. Diesel fuel prices rose three times in the first few days of October, a total price hike of TRY 4.
When calculating this hike’s impact on inflation, it shouldn’t be compared with the price before the increase but the average price in the previous month. Accordingly, the price of diesel fuel has already risen by 6.85% this month, compared to the average in September. The gasoline prices rose by TRY 0.136 in this period. The price hike hovers around 5.83%. The price of liquified petroleum gas (LPG) decreased by 1.36%.
This shows that prices will continue to surge.
Our hands are tied against the hike in oil prices. FX rates can be held for now. We don’t know how much petroleum prices will increase if we are pressured by FX rates!
The hike in petroleum prices will, directly and indirectly, affect the general price level.
The hike in gasoline and diesel fuel prices and the cut in LPG prices will have around a 0.17-point direct impact on October inflation, but the hike in diesel fuel prices, in particular, will raise the price of other goods and services.
There is a link between the hike in petroleum prices and the Consumer Price Index (CPI) in some months, while the hike had a delayed impact in some months, according to the 1-year average price change of gasoline, diesel fuel, and LPG prices based on their weight in the CPI. The hike in petroleum prices won’t affect the CPI alone, the change in other goods and services also plays an important role.
The surge in petroleum prices and the CPI increase was too high, especially in December 2021 and January 2022. The actual impact of the high petroleum price hike in March was seen in April.
The surge in petroleum prices based on the record-high of hike in oil prices in June had a limited reflection in the CPI. Yet, the CPI increase reached 5%, despite the expectation of limited price increases.
The highest price hikes of a year are generally observed in October, excluding in 2021. That’s why we will see a relatively high rate in October, though not the highest rate of the year so far.
October is generally the highest rate of the year, and the pressure from producer prices continues. Add to this the possibility of petroleum price hikes, and we may see an even higher CPI increase than the 4-5% I previously predicted.