Why oil price is so important to us?

As attacks on a petroleum processing facility in Saudi Arabia lead to a loss of 5 million barrels per day of supplies, oil prices show a sudden, drastic rise globally. This situation will sadly result in worse things for us, even worse than “gas price hikes”.

There’s no harm in saying this once again: In over production-based, low added-value economies, energy supply and cost is always a top priority matter. As I often mention in my morning reports, a country in constant need of raw material and energy exports will always be defenceless against political and economic fluctuations.

I tend to keep myself up-to-date with analyses on suppliers and customers, especially in organizations with which I am in close contact. Let alone the fact that I believe that no suppliers should get higher than 30% from total procurement, I always warn executives about this: no customer should receive higher than 25% from total profit; because, suppliers or customers will become a complete dependency whenever these critical ratios are exceeded.

The most apparent example came against Turkey last year, when hotel investors went through a big crisis after Turkey show down a Russian jet straying into its airspace in 2015. Vis-à-vis Russian visitors’ increasing interest in Turkey, making all their arrangement based on this consumer group until that day, hotel investors suffered great losses as a result of this conflict between Russia and Turkey.

Not to mention that many companies, operating in various fields from agriculture to transportation and whose future depends on selling goods and services to Russia suffered tremendous losses as well. This situation was a typical example of Turkish companies’ general incompetence in their planning of procurement and profit. Companies who fail to diversify their Supplier and Customer portfolio will eventually face troubles.

“Turkey’s dependence on foreign energy…”

Turkey experiences a similar thing in terms of importing energy. According to Eurostat, Iran supplies around 40% of Turkey’s oil imports while Russia provides more than 50% of Turkey’s total gas imports. To be honest, Turkish diplomacy is shaped around this reality.

In this sense, western countries are wrong in blaming Turkey for remaining close to Iran and Russia as it is only natural that Turkey purchases energy from its neighbouring countries. Nevertheless, it’s not easy for Turkey neither to remain unexposed to Iran and Russia’s problems nor effortlessly resist their pressure or impositions. First of all, we should remember that Turkey produces its more than 40% of its electricity mainly from natural gas. This being the case, Turkey should obviously follow a careful policy towards Russia and Iran.

However, the West seems concerned about the fact that Turkey works in cooperation with Russia in nuclear energy and military industries as well. Considering that Turkey was unable to maintain stable relations neither with Russia nor Iran over the past centuries, I do not wish to overlook the possibility that Turkey may go through a process, detrimental to Turkey’s diplomatic flexibility, consequently suffering big damages.

Well, you might ask, “Russia provides 100% of Finland’s total gas imports. Does this mean Finland faces threats too?” Finland pulled out the big guns, including nuclear energy in electricity production, which is not a very clever idea if you ask me. So, that is the reason why Russia might have its reasons to supply natural gas to Finland under extenuating circumstances.

As a matter of fact, efficient use of energy is as important as its supply. While more than 45% of energy is consumed by buildings in Turkey, there is evidence that 80% of it is used inefficiently. That is to say, regardless of numerous alternative solutions we come up for energy supply, all efforts will come to naught unless we stop wasting energy. In developed economies, alternative resources are provided after the ‘most necessary’ energy efficiency is achieved, however, in Turkey, we try to diversify resources first. If we keep doing that, we will never be able to achieve energy independence, thus always remain vulnerable to economic shocks and surprises in foreign politics.

The big price Turkey had to pay as a result of jet shot down conflict with Russia is a noteworthy mistake in our recent past. The fact that Turkish foreign policy is evolving in an unusual, even in a strange manner is the outcome of Turkey’s neediness. We should also be aware of certain groups that make money out of situations like these, thus doing their best to stop any alternative types of energy.

In conclusion, it’s not a coincidence that Turkey is one of those economies that will most likely suffer damages of oil price hikes.