Russia will increase gas prices this fall significantly. That is probably why the Hungarian government needed to change its gas price cap scheme. Based on news outlets, the increase in Russian gas prices will be nine or even tenfold. The last time the Eurasian great power raised its gas prices was in May. In the last few weeks it has become certain that they would do so again in autumn. Further details are below.
Russian export decrease, forint weakening
Based on Eurostat data, in May, Hungary imported one m³ of gas for an average of 123 Eurocents, which was 475 forints then. That was a historic peak, but the situation worsened due to the weakening of the forint.
Thanks to a contract with Russia, the Hungarian MVM group purchases gas for a lower price. However, the difference is not significant – g7.hu wrote. They are the biggest Hungarian buyers, so they affect the market most.
In June, gas prices rose again because the Russians decreased their import volume, and the forint lost value. That is why the government decided to modify gas price cap scheme in Hungary. They calculated that the gas price would be so high by September that the utility price cap scheme would become unsustainable. The second Orbán cabinet introduced it after their 2010 landslide victory. Maintaining it was one of their promises in the 2022 general elections.
Gas prices will skyrocket by fall
G7 made some calculations based on the changes in the stock market prices. They estimated that gas prices will continue to rise in the international markets until early autumn. One m³ of Russian gas will cost more than 600 HUF (150 Eurocents) in September.
That would mean that the market price of the gas would be nine or even tenfold more than the price Hungarian residents get, thanks to the utility price cut scheme. As a result, the state-owned MVM would suffer hundreds of billions of forints losses every month, and the government would have to supply that money from other sources. That is why they decided to modify the gas price cap scheme.
As we wrote, the government set retail energy prices for private consumption last week. Szilárd Németh, the government commissioner in charge of the government’s utility price cap scheme, said that the price cap would be applied for up to 1,729 cubic metres of gas used per year (144m3/month) and for 2,523 kilowatt hours of electricity used per year (210kWh/month) by a household.
Households will pay 102 forints (EUR 0.25) for a cubic meter of gas for their consumption below the limit, and 747 forints for each cubic metre in excess, while the market price is 1,020 forints,
Németh said then.
The parliament declared a state of energy emergency in Hungary in mid-July. Even PM Viktor Orbán acknowledged that there would come difficult times in Hungary.
Source: g7.hu, DNH, MTI
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