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Soaring energy prices in resource-poor Turkey and a record dip of the local currency are forcing fuel distributors to consider how to update pumps to quote double-digit gasoline and diesel prices, Bloomberg reports.
Turkey relies on imports for much of its energy demand. The recent price rallies of energy commodities have sent fuel prices higher and nearing double digits.
A slump in the local currency, the Turkish lira, against the U.S. dollar will further raise the prices at the pump, and gas stations need to figure out now how to display double-digit prices.
Royal Dutch Shell, which has over 1,100 gas stations in Turkey, is currently reviewing which of its outlets need updates, a source with knowledge of the matter told Bloomberg. Koc Holding and BP are reportedly prepared and can act quickly in updating the pumps, Bloomberg sources say.
BP, which operates more than 750 gas stations in the country, can update the gas pumps in two weeks.
The need for possible updates to thousands of pumps comes as the Turkish lira crashed to a record low on Friday after Turkey’s central bank slashed its key interest rate by 200 basis points in a shock move under pressure from Turkish President Recep Tayyip Erdogan.
Despite a jump in inflation, Turkey’s central bank cut on Thursday the interest rates for a second time in two months, following a 100-basis-point reduction in September, contrary to most of the world’s central banks, which are already looking to tighten monetary policy.
The Turkish lira has already depreciated by 23 percent so far this year, pushing inflation as high as 20 percent and eating household incomes.
Following Thursday’s rate cut in Turkey, JP Morgan said inflation would be higher than it had initially expected, and expects another 100-basis-point cut in the key rate in November.
“Such front-loaded easing suggests that bringing down inflation in a rapid way is not a policy priority,” JPMorgan’s Yarkin Cebeci wrote in a note carried by Reuters.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com