If I were to ask, “What is the hot-button topic plaguing our minds at the moment?” no doubt you would answer that “energy prices” are right up at the top of the list of the subjects that have a major effect on our daily lives and short-term future.
We seem to be facing unforeseen developments in this area before a chilly winter, which is right at our doorstep.
Natural gas, electricity and coal prices have skyrocketed, especially in EU states.
As we all know, the basic rule in economics is:
If the demand for a product is high but the supply is low, the price of said product will only increase.
Energy prices skyrocketed this fall as production decreased and demand shot up, largely due to pandemic-related reasons.
To explain the situation, let's use the information provided by Turkey’s Minister of Energy, Fatih Dönmez, who appeared on NTV last week.
But first of all, let's start by quoting these words by Dönmez: "I've been in this industry for 30 years, and I don't remember witnessing anything like this.”
Let's take a look at the following figures quoted by Minister Dönmez last week to ascertain the anomalies in the so-called spot market, where daily electricity and gas trades are determined:
According to the Turkish minister, electricity prices in Italy have increased by 274 percent since the start of the year, while Spain recorded a 234 percent bounce.
Meanwhile, there’s a 229 percent increase in Greece; 20 percent in Bulgaria; 183 percent in Germany; 165 percent in France; and 145 percent in England.
In Turkey, this figure hovers around 70 percent.
Below are two examples of the kind of price bounce Europe is currently facing: The price of natural gas on the Dutch stock market has increased by 362 percent since the beginning of the year. In the U.K., this rate stands at 285 percent.
"At a time when energy prices are devastating global economies, we are doing our best to minimize the cost increases for our citizens," continued Dönmez.
This sums up where things currently stand in Turkey.
As the figures we quoted above depict, we are lucky to be faring better than Europe in terms of electricity and natural gas costs.
Furthermore, roughly half of the total costs are not reflected in the public’s bills in line with government policy.
Since the beginning of the year, natural gas has increased by 18 percent in total. While for electricity, it stands at around 21 percent.
If the costs were reflected on bills as they are, they would probably have doubled.
The issue is not just confined to the increase in energy prices.
There is also the issue of “supply,” where Turkey stands at a more advantageous position than the rest of Europe.
Europe still has not completed the Nord Stream project, which is being built to import Russian gas, due to U.S .sanctions threats.
Turkey is also in good shape in terms of its pipeline capacity.
The TurkStream and TANAP lines are ready for gas to start flowing.
In addition, lines that have been running since time immemorial already exist.
Let’s quickly recap the rest of Mr. Dönmez’s statement:
“There is the Blue Stream from the Black Sea, our line from Azerbaijan, and our line from Iran. We also added two floating LNG terminals, which we call FSRU. We have increased the capacity of underground natural gas storage, which as of today stands at just over 4 billion cubic meters, which is currently almost full. We will have all of them filled within the next month. Technically, there is no problem in terms of infrastructure.”
At a time when electricity, oil, natural gas, and even coal, prices are skyrocketing, the importance of countries meeting their own energy needs has never been more pressing.
Another reason behind the increased reliance on natural gas in Turkey this year is that the country’s hydroelectric power plants have been mostly out of service due to the ongoing drought.
In any case, all roads lead to the question of how well you can afford your own energy.
As is known, Turkey has made a big splash globally thanks to the natural gas reserves it discovered in the Black Sea in the summer of 2020.
We know that this gas will start heating our homes starting 2023, that is, two years from now.
According to the information provided by Energy Minister Dönmez, when the maximum production capacity has been reached in 2027, gas emanating from the Black Sea will meet one-third of Turkey's annual domestic consumption.
In late July, while aboard the Fatih drilling ship off the Black Sea coast, I asked the minister, "How much is the gas under us worth?" and he answered: "It's worth 100 billion dollars at current prices."
Its current value has gone through the roof today.
But the good news is that new drilling in the Black Sea is likely to be accompanied by more good tidings.