Fuel price drama in Hungary: Experts’ outlook & Hungarian government’s possible next move revealed

At the beginning of the week, reports surfaced of fuel price hikes, drawing attention as Minister of National Economy, Márton Nagy, had consultations with MOL and the Hungarian Association of Petroleum (MÁSZ) regarding these rises. An energy policy expert hinted at the possibility of the government employing robust measures in response.

According to holtankoljak.hu, the wholesale prices for petrol and diesel are set to decrease from Friday onwards. Petrol will see a reduction of 3 HUF (EUR 0.0077), while diesel will become 5 HUF (EUR 0.013) cheaper for petrol stations. Consequently, average prices from the 12th of April will stand at 641 HUF/litre (EUR 1.65/l) for 95 petrol and 653 HUF/litre (EUR 1.68/l) for diesel.

Nevertheless, there is a possibility of further price cuts being curtailed, as the wholesale price of petrol is expected to rise by 3 cents gross, while for diesel, the pump price to wholesalers will rise by 6 cents gross starting today.

According to Erste’s analysis, there might be another price cap. However, there are speculations that Minister Márton Nagy might opt for a voluntary reduction in prices. Such action could potentially yield short-term negative effects on MOL, the Hungarian oil and gas company.

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Experts’ reaction to fuel price changes

Looking ahead, Századvég’s energy policy expert Oliver Hortay underscores the significance of the trajectory of geopolitical conflicts. He stresses three main factors:

• Firstly, attacks on Russian oil refineries by Ukraine and events in the Middle East are key reasons behind recent rises in oil and fuel costs. Should these conflicts escalate, it could elevate geopolitical risks, while de-escalation might temper prices.
• Secondly, forthcoming decisions from the OPEC oil cartel will come into play. Influenced by geopolitics, alongside market fundamentals like rising prices and projected demands, there’s a growing justification for relaxing quotas, which could impact global oil prices.
• Lastly, several remaining elements could influence Hungary’s fuel price situation. These include Russia’s efforts to resolve its price disparity with Western oil, ongoing increases in transportation expenses from countries such as Croatia and Ukraine and the volatility of the forint against the dollar.

In response to inquiries by Economx, Oliver Hortay, Századvég’s energy policy expert, notes a recent uptick in fuel prices. He links this surge not only to fluctuations in the forint exchange rates but also to the global oil price. At the beginning of 2024, one USD was 345 HUF, with Brent crude oil priced at USD 75 per barrel, while Russian Urals crude stood at USD 58 per barrel.

However, by April, the dollar rose to 360 HUF, Brent crude to USD 90 and Urals crude to over USD 80. Hortay pointed out that fuel costs are mainly dictated by worldwide oil rates, which have been rising lately because of conflicts among nations. The query arises as to how much influence a Hungarian minister holds over fuel prices amid such forceful global market dynamics and events.

Oliver Hortay suggests that the government has options to address fuel price concerns through both stringent and lenient measures. Stringent measures entail regulatory adjustments like price freezes, while lenient measures involve steering market players without regulatory alterations, as seen in the phased-in implementation of new excise duty rates.

Deciding between these approaches requires considering various factors such as interest rates, geopolitical developments and market player conduct. The forthcoming meeting between the Minister of National Economy and representatives of MOL and MÁSZ adds further complexity to the decision-making process.

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