The Central Bank of Turkey (CBRT) published a research note titled "Fuel Price Formation: Is Brent Oil Price a Good Predictive Tool?"

The Central Bank of the Republic of Turkey (CBRT) has published a research note titled "Fuel Price Formation: Is Brent Oil Price a Good Predictive Tool?" The findings shared in the conclusion section of the report indicate that fuel prices are primarily composed of product price, wholesale margin, income share, distributor margin, dealer margin, and taxes. While the product price and tax items are more prominent in the final prices of gasoline and diesel, the distributor-wholesaler margin holds a relatively significant share in the final pricing of LPG. Historically, the share of product price in the final fuel price has increased across all three fuel groups, while the share of taxes has decreased.

Given their potential to influence inflation through cost and expectation channels, the trajectory of fuel prices is crucial for the upcoming period in the context of the disinflation process. The importance of accurate and timely fuel price forecasts is increasing as they provide significant guidance for economic actors and policymakers. Therefore, it is essential to utilize the correct product price in fuel price forecasting models. This study empirically tests whether the Brent crude oil price is a good predictive tool for fuel price forecasting models. The analysis reveals that using the relevant product price specific to the fuel group instead of Brent oil yields more accurate results and provides more information. Consequently, it is vital to consider product price developments when creating forecasts for fuel product prices. In models using product prices, the analysis shows that while the exchange rate plays a notable role in the final price of gasoline, a more balanced relationship is observed in the final price of diesel. For LPG, the coefficient of the product price remains lower compared to the estimated coefficients of the other two fuel groups. Future studies, focusing on the asymmetric relationships between product prices and exchange rates, could contribute to policymakers' assessments regarding the disinflation process.