Prof. Dr. Şenay Yalçın: Inflation drops if crude oil prices remain stable
Energy Specialist Prof. Dr. Şenay Yalçın stated the drop in crude oil prices is temporary and added, "Each 10-dollar-drop in crude oil prices in Turkey contributes over 4 billion dollars to the economy. If we think that there is a 30-40-dollar drop and it persists on, it will return over 10 billion dollars. Gasoline prices will also be affected by that positively. It can bring down the rate of inflation in 1.5 – 2 points”.
Crude oil prices fell to 31 dollars with a drop of 30% after Organization of the Crude oil Exporting Countries (OPEC) and non-OPEC countries could not comprise about persistence of stoppage of production at the meeting organized in Vienna, the capital city of Austria.
While OPEC members suggested a 1.5 million-barrel-stoppage, Russia, an OPEC+ member, did not accept it and reported that its reserves are well-prepared against price drop. Saudi Arabia decided to increase its crude oil production and decrease the sales price.
Coronavirus (Covid-19) pandemic, which broke out in China and has spread around the world, has adversely influenced worldwide crude oil consumption and expectations for global economic growth and caused pressure on the prices downward.
“DROP IN CRUDE OIL PRICES IS TEMPORARY”
Prof. Dr. Şenay Yalçın, the Rector of Nişantaşı University, commented on the drop in crude oil prices and how it will affect primarily Turkey, and then Russia and other countries. Prof. Dr. Yalçın, saying the drop in crude oil prices is temporary, stated, “Hopefully this drop will be permanent. For, its permanence is of a significant step for the countries which do not produce crude oil but just consume.”
WHY RUSSIA SAYS “NO”?
Prof. Dr. Yalçın, stating crude oil prices are high in terms of cost, exclaimed, “80% of the export volume of Russia consists of crude oil and natural gas. If Russia accepted it, its economy would be affected adversely. Therefore, Russia said “No” to this offer. Because no compromise was provided at the meeting, a sharp fall existed in the crude oil prices.”
Prof. Dr. Şenay Yalçın highlighted no sudden fall is expected and said that drop in prices will have different results for both exporting and importing countries.
CONSUMPTION OF CRUDE OIL DECREASES IN CHINA DUE TO CORONAVIRUS
“I believe the drop of the prices will be temporary because Russia may take a sudden decision”, said Prof Dr. Yalçın, and he added supply demand equilibrium is based on benefits. He also said, “Shopping has been hindered to a great extent because of coronavirus (Covid-19) that broke out in China. Therefore, crude oil production of China has decreased. Reduced number of flights by the airlines influenced by the virus has also resulted in decrease of consumption. When the consumption decreased, the prices started to drop down”.
“ANNUAL INFLATION MAY DROP IN RATE OF 1.5 – 2 POINTS”
Prof. Dr. Yalçın told, “Each 10-dollar-drop in crude oil in Turkey contributes over 4 billion dollars to the economy. If we think a 30-40-dollar-drop exists and persists on, then it will return over 10 billion dollars to the economy directly. Even though gasoline prices do not fall to a great extent, it will be positively affected. However, it may pull the inflation down on annual basis with a rate of 1.5 -2. The drop in crude oil prices will both affect world stock market and cause the interests to decrease. I believe positive drops in the world and Turkey will exist.”, stating Turkey is a foreign-dependent country in terms of crude oil and natural gas.
HOW IS RUSSIA AFFECTED BY THE PRICE DROP?
Prof. Dr. Şenay Yalçın stated that Russia will not be influenced by the drop in crude oil prices in case it does not limit its production, and added, “However, if it limits the production, it will be adversely affected because crude oil and natural gas are primary exported products of Russia”.
TURKEY HEADS FOR ALTERNATIVE ENERGY
Prof. Dr. Yalçın reported that such immediate falls and rises cause the countries to draw up long-term plans and said, “Turkey has taken important steps in terms of diversifying the energy in recent years. It has started to activate its alternative energy resources in order not to be affected negatively by such sharp falls and rises”.Release date: 11.03.2020