Outrageous: Hungary is buying Russian gas for a five-fold price

It is no secret that Hungary is overly dependent on Russian natural gas supplies. This has multiple reasons, but the most important one was its favourably low price. How the turntables, in recent times Hungary pays more for natural gas than anybody else. The government promoted this move by saying that Hungary bought natural gas for a fifth of the European market prices.

According to G7.hu, Vladimir Putin’s statement about the cheap natural gas meant for Hungary was an exaggeration. There might have been a point in time when the prices were truly a fifth of the European market prices, but now the country is paying five times the price. The fixed, long-term price agreements with Russian partners are just a myth as the agreements are based on stock market prices. The Russian natural gas prices usually follow the prices of the Dutch stock market by a two-month delay. After the soaring energy prices, not even the government could further promote Russian natural gas as cheap.

Horror prices

The fifth of the European market prices, according to analysts was at best fourth of the prices. This was still a great deal but because of the delays, steep rises in prices could create huge gaps in the market. However, this is true in the opposite direction too as the Russian prices will eventually follow the stock market prices. Russian natural gas is incredibly cheap when there are steep rises, but when there are steep falls, like now, Russian natural gas becomes horribly expensive.

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If the estimations are correct, then Hungary bought Russian natural gas for about HUF 900 (EUR 2.18) per cubic metre. However, European market prices were only at about HUF 120 (EUR 0.29) at that time. Therefore, Hungary successfully paid five times the price for the Russian natural gas supplies. At a non-public meeting between the Hungarian and Russian foreign ministers, a new agreement was made in the summer. During the meeting, Hungary agreed to buy 700 million cubic metres of gas with a 1.85 billion euro loan. If this was the actual purchase price, then the price of natural gas was above HUF 1,000 (EUR 2.43) per cubic metre.

As we can see this is a periodically beneficial agreement. It is plausible that in the next two months Russian natural gas will be cheaper once again. The main problem is that the government does not use this formula to the country’s advantage. When natural gas prices for Hungary were very cheap compared to the European market prices, the volume of imports was quite low. In such unpredictable times, it is hard to guess when the prices will be favourable.

The government could save a lot of money by simply playing with the source of the imports. As now the price of Russian natural gas is high, the only thing the government should do is buy natural gas from the European markets.

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Source: G7.hu