Vast discounts implemented by new players in the gasoline business are hurting large fuel distributors like Opet. High taxes encourage smuggling, says firm
This photo shows an Opet branch in Istanbul. Opet in partly owned by Turkey’s Koç Group.
Turkey’s ever-growing gasoline market is feeling the pain of becoming more regular as one of the leading companies complains about both vast discounts implemented by new players in the field and a major shift in relations between the stations and distributors.
It was impossible to drop prices by more than 10 percent, like stations of some small distributors are doing today, as this rate exceeds the regular profit margin, said Fikret Öztürk, chairman of Opet, which is partly owned by Koç Group, Turkey’s largest conglomerate.
“The consumers should be careful about this,” Öztürk said during a press meeting late Feb. 15 in Istanbul, without elaborating.
“Either they are selling [gas] on losses or something else is happening there,” Öztürk said.
He also called on consumers to be careful about the amount of claimed discounts and quality of the fuel they use.
Erol Memioğlu, head of Koç’s energy group and a board member of Opet, said at the same meeting these small firms might be concentrating on increasing the value of their assets rather than trying to become well-rooted companies.
However, Starpet, a smaller firm which has recently increased the number of its stations to 450, says such a damping is possible.
“Large distributors have to share their profits with the station-runners. As we own many stations we can reflect this in prices,” Arif Serdar Binici, a regional representative for the Marmara region, told the Hürriyet Daily News
during a phone interview yesterday.
The number of gasoline distributors jumped after a regulation passed that obliges distributors to renew contracts with gas stations every five years.
The new rule that was made public in September 2010 and started being implemented last year have cost around $2 billion for distributors as they were forced to pay higher prices for contracts, Opet’s Öztürk said.
“If it was not retroactive the loss would not be that big,” he said. Shift favors small firms
However, “The shift is advantageous for smaller firms in term of breaking a monopoly system,” Binici said. The sector is becoming more regular every day, Öztürk said. “What we demand is an end to oil smuggling.”
According to Memioğlu high taxes on gasoline and diesel is making the sector more attractive for smugglers. The tax of fuel varies between 60 and 70 percent.
“The government is collecting taxes over oil companies, which is an easy way,” he said.
The board member also criticized the official attempts to boost bio fuels. “One should think well about how this will affect the country’s current account deficit,” Memioğlu said, noting the raw material for bio fuel would inevitably be imported.
Koç Group, the 50 percent partner in Opet, owns Tüpraş, the country’s sole oil refiner. Koç also is the manufacturer of Ford and Fiat cars in Turkey.
The 2011 net profits of Opet, which are not released officially yet, stand at around $150 million, said Cüneyt Ağca, the general manager, during the Istanbul meeting.
Opet has launched a joint company with Turkish Airlines, the national flag carrier, in 2009. THY Opet, the 50 percent joint firm, has today started selling fuel to Singapore Airways, Lufthansa and British Airways, along with the Turkish Airlines, Ağca also noted.