Baku - Tbilisi - Ceyhan crude oil pipeline and economic effects on Turkish economy

Oil and Natural gas will always protect its effect for world economy until any other material will be discovered that can substitude oil and natural gas as an energy source. As soon as energy has been used for industry, the struggle for having energy resources, keeping the production, controlling the transport way of energy has been started. Therefore, after the collapse of Soviet Union, The Caspian Basin, that has 20 billion tone petroleum reserves, located at the center of the energy economy.The aim of this study; is drawing a theoretical framework for energy sources and energy economy, investigation of economic effects of Baku-Tbilisi-Ceyhan oil pipeline and present suggestions according to achieved results.In this study, the current supply and demand structure of petroleum and natural gas was investigated with their supply and demand projections. It was determined that petroleum and natural gas will be the main energy resources of the world economy in the next 30 years. Besides, the current and planned energy transportation lines in the basin and energy economics which is the most dynamic part of the world economy was investigated. In this context, espicially the inelastic supply and demand structure of energy resources was attracted attention. Empirical evidences show that the demand elasticities of energy is quite inelastic both in the long and short run due to the limited substitution possibilities both in the long and short run of energy. The same inelastic structure can be observed in the supply side. The main reason behind this situation is the energy supply is mainly depends on fixed capital investment. Because of the inelastic structure of the oil and natural gas shocks deeply effect the world economy. However, changing economic situations after 1973, espicially with more flexible central bank monetary policies and economies that utilized the less petroleum both in the production and consumption decrease the possible effects of new energy shocks.After explaining the theoretical consept of energy, the effects of Baku-Tbilis-Ceyhan main oil pipeline was investigated both in the macro and micro perspective. The micro economic effects of the pipeline was appeared mainly at the construction stage. The main component of these effects are the nationalization process that occured in the construction stage. The main livelihood source of the households who live on the pipeline route are agriculture and ranching. 79,7 % of the people in that area are farmers. So, the pipeline?s nationalization phases were analyzed carefully and the whole pipeline routes except the surface facilities, temporarly nationalized and the damages were compensated according to the World Bank standarts. Hence, no serious negative micro effects can be observed.On the other hand, the macro effects of the project was analyzed both direct and indirect perspective. Taxrevenues and Turkish Petroleum Corporation?s partnership?s revenues from the petroleum areas was initially investigated for the direct perspective. It was determined that these revenues are under the expected levels. For indirect effects, the three effects of pipeline was searched. These are effects on employment, effects on Turkish energy supply security and potential effects on Ceyhan region. Employment effects occured temporarily due to the temporarily employment at the construction stage does not exist currently. The effects of the pipeline on Turkish energy supply security is significant and allows chance to generate strategic oil reserves without any additional costs. The last indirect effect is about Ceyhan region. But occurance of these effects depend on application of a comprehensive development program and establishment of an energy industry in Ceyhan region.Key Words: Baku-Tbilisi-Ceyhan Crude Oil Pipeline, Energy Economics, Caspian Oil, Turkish Economy.