Motor fuel prices in Turkey

• The key issues (e.g. taxes) related to motor fuel prices in Turkey are explored.
• Their impact on transport activities and income distribution is also investigated.
• An econometric analysis is performed to estimate motor fuel demand in Turkey.
• Motor fuel demand in Turkey is found to be quite inelastic.
• Turkish fuel market is open to opportunistic behavior by firms and the government.

The world׳s most expensive motor fuel (gasoline, diesel and LPG) is sold most likely in the Republic of Turkey. This paper investigates the key issues related to the motor fuel prices in Turkey. First of all, the paper analyses the main reason behind high prices, namely motor fuel taxes in Turkey. Then, it estimates the elasticity of motor fuel demand in Turkey using an econometric analysis. The findings indicate that motor fuel demand in Turkey is quite inelastic and, therefore, not responsive to price increases caused by an increase in either pre-tax prices or taxes. Therefore, fuel market in Turkey is open to opportunistic behavior by firms (through excessive profits) and the government (through excessive taxes). Besides, the paper focuses on the impact of high motor fuel prices on road transport associated activities, including the pattern of passenger transportation, motorization rate, fuel use, total kilometers traveled and CO2 emissions from road transportation. The impact of motor fuel prices on income distribution in Turkey and Turkish public opinion about high motor fuel prices are also among the subjects investigated in the course of the study.