MOL CEO warns about possible 70-80% price surge in Hungary’s fuel market

MOL’s CEO, Zsolt Hernádi, shared crucial insights in an interview into the challenges in Hungary’s fuel market. Notably, he has raised concerns about a possible substantial increase in fuel prices, estimating it to reach up to 70-80 percent.

Hernádi’s critique of the overregulation by governments

The significant price increase is a matter of great consideration for both consumers and industry players. It could have far-reaching consequences on the market dynamics. According to the interview he gave to Index, Hernádi strongly asserted his belief that governmental overregulation poses a threat to the efficient functioning of the market. He considers it a monumental mistake for any government to believe it can regulate every facet of the market. He urges for a more hands-off approach to foster a balanced and sustainable economic environment. Furthermore, he advocates for a return to a more predictable economic policy, citing the period before the pandemic as an example.

Fuel price dynamics and recent developments

Addressing the recent HUF 41 (EUR 0.11) price increase in fuel, Hernádi acknowledges its significance but points out that the year concluded with a notable decline in fuel prices. This development has played a role in mitigating the immediate impact of the increase, providing some relief to consumers.

Excise tax hike and its implications

Discussing Hungary’s failure to meet EU expectations regarding excise taxes, Hernádi highlights the decision to implement the tax increase in two instalments. He contends that this move is not only a simple business decision but also one that is intended to benefit carriers, thereby addressing concerns within the logistics sector.

Geopolitical factors affecting fuel prices

Hernádi predicts challenges in achieving significant price reductions within the fuel market this year, attributing this to the numerous conflicts around the world. He underscores the potential impact of geopolitical events, especially in the Middle East. For example, he warns that the opening of a new front could lead to a substantial price increase.

If another front opens up in the region and the Strait of Hormuz, where 20 percent of the global oil and gas trade passes through, is closed, we could see a price increase of up to 70-80 percent. As a rule of thumb, a 1 percent drop in world production could trigger a 10 percent price rise in the short term.

Hernádi cautions.

Misconceptions about energy companies and international conflicts

Dispelling a common misconception, Hernádi rejects the idea that energy companies benefit from international conflicts. He asserts that such conflicts confuse markets, and the long-term prosperity of the industry relies on achieving a balanced and stable situation.

Challenges in diversifying energy sources

Hernádi discusses challenges faced in diversifying energy sources, particularly reducing Russian exposure. Additionally, he points out the difficulties in replacing Russian sources with alternative options, such as increased oil purchases from the South. The exploitation of monopoly positions, exemplified by the Croatian people, presents a significant hurdle. Supply costs soar to four times the fair market price as a consequence.

Read also:

• Brutal fuel price hike comes from January in Hungary
• Hungarian MOL’s fuel price increase in January happens in unexpected way

Source: Index