According to the KSH, Hungarian gasoline is expensive
As we reported, the Central Statistical Office published its statistics on Friday with the aim of comparing fuel prices in the region.
DOMESTIC GASOLINE AND DIESEL PRICES ARE ABOVE THE REGIONAL AVERAGE.
Based on data from the EU Weekly Oil Bulletin, the average price of 95-octane motor gasoline in Hungary was HUF 640, while in regional countries it was HUF 620, so the average price in Hungary 3.2% higher at the regional average value. The average weekly price of diesel fuel in Hungary was HUF 654, which is HUF 31 exceeded by 5% the regional average price of HUF 623.
Minister of National Economy Márton Nagy reminded in connection with the new series of data that these statistics will provide the basis for a possible government intervention in the fuel market: the government will meet this week and will examine the issue and think about whether it is necessary to intervene in order to strengthen the agreement with the fuel market players – the agreement is about domestic fuel prices should be in the middle range of the region.
“Next week it will become clear what the government will do, I ask for your patience until Wednesday or Thursday“, the politician said on Friday, adding that
the re-introduction of the petrol price stop is not excluded.
Is the methodology good?
If we take the KSH’s methodology as reliable, then it can be said that according to the data of April 15, in the case of gasoline, domestic motorists could fill up with the fourth most expensive fuel, In Bulgaria, for example, gasoline costs HUF 100 less per liter. And we were on the podium for diesel, according to the KSH report, the Bulgarian price here is also more than HUF 100 lower than the Hungarian one.
The average values we indicate differ from the KSH averages because we also included Hungarian fuels in the regional average. By the way, the data source is from mid-April, because the data on the European Commission’s website are updated every Thursday with the average fuel prices of the given week’s Monday, so we will be able to publish the latest figures on Thursday, the 25th.
The bar charts above were sort of an introduction to this chapter, which even the “Look for the fault” we could have given an address. Two energy market experts also pointed out errors in the KSH’s methodology, which significantly distort the situation and do not necessarily encourage the government to draw the appropriate conclusion.
The more spectacular distortion is nothing but the range of countries considered to be regional. Ottó Grád, the president of the Hungarian Mineral Oil Association, which represents colored wells, pointed out to Portfolio’s question that
the inclusion of Bulgaria, which is significantly below the prices of other countries, is difficult to interpret,
but neither to Poland nor the Czech Republic is it viable for Hungarian motorists to travel hundreds of kilometers to reach cheaper fuel prices. According to the specialist, in the regional comparison it would be worthwhile to take into account only the prices of the bordering countries, and with the elimination of the Czech, Polish and Bulgarian prices, the regional average price would be much higheronly 4 forints for gasoline (+0.6% compared to the Hungarian price) and 1 forint for diesel (0.2%).
Are taxes really high?
The less visible – and not even included in the KSH material – problem with the data source is none other than that tax content. In addition to Ottó Grád, Tamás Pletser, Erste’s energy expert, also pointed out that the commission’s data, which form the basis of the statistics, rely on the declarations of individual countries in the case of tax content, and the domestic body only reports the three major tax items, i.e. VAT, excise tax and includes a stocking fee in the charges.
However, the EKR fee and the special retail tax are not included either, although these are paid only by Hungarian fuel retailers; at the current gasoline price, these items represent a total of HUF 27 extra in the consumer price of gasoline.
However, what is really interesting in terms of tax items is the tax level corrected by the EKR fee and the retail tax
cannot be considered too high at all compared to the values of neighboring countries,
tax content of 49.1 percent calculated based on the data source of MÁSZ almost exactly the same as the regional average. The domestic situation is a little less favorable for diesel, where the tax content of Hungarian fuel clay is 47.2 percent, compared to the average of 45.2 percent.
What else can cause “high” gasoline prices?
Overall, the conclusion regarding the regional situation of domestic fuel prices can therefore be that:
there is nothing to see here.
In countries neighboring Hungary on average, you can get it at a similar price for a liter of gasoline(regional average of HUF 636 vs Hungarian price of HUF 640), but the fuel market players do not necessarily rightly point in the direction of the high tax content, because even with the consideration of the special retail tax and the EKR obligation the tax burden of the domestic sector is almost at an average level.
In the regional comparison, it is a very important factor in addition to taxation the performance of currencies, exactly against the dollar, because during the procurement you have to pay for the crude oil in dollars. In this regard, the past few months have not been favorable, to put it mildly:
so far this year, the forint has weakened by 6.8 percent against the dollar, while the average weakening of the currencies of neighboring countries was only 3.5 percent.
We have no official data on the profit content of the domestic oil market players and it would be difficult to compare the procurement cost structures in percentages across countries, however, given the other information, especially the weak forint, it is likely that
domestic actors operate with lower margins than the regional average,
whether it is the purchase and refining premium (wholesale margin) or the profit of the wells, i.e. the retail margin. Knowing this, another fuel price cap does not seem justified on the part of the government.
What price cap can you expect?
However, a decision on such a measure may be made this week, so it might be worth thinking about what the new price cap might look like. Of course, it is impossible to know in advance exactly what to expect, but the past can provide some clues.
This measure was introduced in Hungary for the first time in November 2021, when the upper limit of the price of regular gasoline and diesel was set at HUF 480. It is important to highlight that, in contrast to the Croatian example (at that time only Croatia used a similar measure in the EU) the price of fuel was determined not at the current price level, but much lower: after the decision, the price of 95 gasoline decreased by HUF 26, while the price of diesel was HUF 32.
If we also add to the solution that despite the government directive issued several months ago according to the communication, the domestic fuel price is still not in the middle range of the region, then it is very likely that the price of gasoline and diesel will not be frozen at the current market price, but a lower price level will be the basis of the measure. This is similar to the previous solution could be an exchange rate seen a few weeks ago. However, since government communication so far has focused on the regional average price, it is also possible that
THERE WILL BE A KIND OF DYNAMIC PRICE FREEZE, THAT IS DOMESTIC FUEL PRICES WILL BE FIXED AT THE REGIONAL AVERAGE LEVEL calculated by KSH.
In this case, the gasoline price could change weekly, depending on the average price calculated by the latest methodology of the KSH. If the latter solution were to come into effect, with it based on the current figures, the price of domestic gasoline and diesel would decrease by HUF 20 and HUF 31, respectively, which is roughly the same as the decrease that took effect at the first price stop. In this case, fuel tourism would probably be more avoidable, and even though this method would significantly narrow the margins, it would at least have a kind of flexibility, because the price levels would react to changes in the world market price, so it would be more predictable than a fixed price cap.
What was wrong with the price cap?
The price cap measure introduced in November 2021 and its effects on the market may flash back as a painful memory for many – because, as is known, with the introduction of the measure, the tax content of fuels did not change, the dealer’s margin decreased, and the dealers were not compensated.
They did not even have the opportunity to touch the excise tax because the European Union stipulates 36 euro cents as the minimum excise tax for gasoline, and since the forint weakened significantly against the euro in the months preceding the measure, the domestic tax rate fell below this minimum level.
That is why Mol and the Hungarian Mineral Oil Association also emphasized the importance of the stability of the domestic fuel market following a government briefing last September, the general secretary of MÁSZ also said that
IF THE GOVERNMENT ROLLS BACK THE AUTHORITY PRICES THEN SERIOUS SHORTAGES WOULD FORM WITHIN A VERY SHORT TIME.
But what exactly was wrong with the measure? A reference to the past follows.
From the beginning, the fuel price cap proved to be difficult to sustain and to strongly distort market conditions, so the government revised the measure in several rounds in the months before its introduction, successively removing an increasing number of consumers from the scope of the price cap. At the end of 2021, the government ordered the HUF 480 official price, which was extended in several steps until the last day of 2022. The following issues and difficulties occurred in 2023 before the measure was introduced:
- At the beginning of March, the voices from the direction of the Association of Hungarian Road Carriers became stronger and stronger to supply chain disruptions attention was drawn. The government reacted to this by explaining in a government briefing the response measures that were intended to affect the fuel market with the aim of maintaining the gasoline price cap and security of supply. In the first round, the group of those entitled to the 480 HUF fixed petrol price was narrowed down, to be precise, Hungarian vehicles over 7.5 tons and foreign vehicles over 3.5 tons could only refuel at the high-pressure stations after that, at market prices.
- Then at the end of May came the announcement that it was fuel tourism to avoid, Hungary imposes different fuel prices for vehicles with foreign license plates and those with Hungarian license plates.
IN CONNECTION WITH THIS DECISION, THE EUROPEAN COMMISSION INITIATED PROCEEDINGS AGAINST HUNGARY:
called on the Hungarian authorities to comply with the EU legal provisions regarding the free movement of goods and services, the freedom of establishment, the free movement of citizens and workers, the principle of non-discrimination, and the notification rules under the Single Market Transparency Directive.
- At the end of July, another restriction came, the HUF 480 price was then kept up only for privately owned vehicles, taxis and agricultural machinery. As a precursor to the tightening, Mol announced the shutdown of the Száhahalombatta refinery due to maintenance, which made the supply of gasoline in the country more difficult – according to Gergely Gulyás the two ways of supply can be imports and pre-emption of strategic stocks. The latter is only possible to a certain extent, and hedging from imports was not an option because
IT WAS NOT WORTH FOR FOREIGN COMPANIES TO EXPORT TO HUNGARY AT THIS DOMESTIC FIXED PRICE.
- From November Mol limited refueling at all its domestic filling stationsthe refueling limit at fast-charging stations became 100 liters/transaction − other networks have introduced (much) lower limits for official-priced products.
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Due to the protracted maintenance works at the Száchahalombatta refinery and the loss of imports, which previously accounted for 30 percent of domestic fuel consumption, the fuel supply problems became more and more serious at the end of November, and a buying panic reaction started on the part of the population, practically, there was a partial fuel shortage on the entire Mol network. After that, the originally further planned fuel price stop was implemented.
Cover image source: Getty Images
