Is Hungarian gasoline expensive?
The latest data on the fuel prices of the EU countries are now available on the European Commission’s website, and the regional rankings for gasoline and diesel can be prepared based on this information. As Ottó Grád, the president of the Hungarian Mineral Oil Association, which represents large petrol station networks, pointed out to Portfolio, during the comparison the prices of neighboring countries should be taken into account, Hungarian drivers can go to these countries to refuel in unfavorable circumstances.
In this environment, according to the latest information in the case of gasoline, domestic fuel is HUF 8 more expensive than the average (1.3%),
while for diesel it is slightly larger, HUF 10 difference occurs (1.6%). Interestingly, the average calculated from the consumer prices of the surrounding countries is also HUF 640 per liter, but the standard deviation is much larger, mainly due to the high price of Serbian diesel.
And in the figure below can also be seen on the mapwhere gasoline is cheaper and where it is more expensive in neighboring countries than in Hungary.
For diesel, the situation is as follows:
What can KSH statistics show?
As is known, relying on the data of the Commission, the Central Statistical Office will publish its own regional fuel price ranking on a weekly basis, which is important because these statistics will to provide the basis for a possible government intervention in the fuel market.
As we pointed out in our analysis last week, the agency’s methodology has its own flaws, which significantly distort the situation and do not necessarily encourage the government to draw the right conclusion. The more spectacular distortion is the range of countries considered to be regional:
the inclusion of Bugária in the regional average is particularly difficult to interpret,
not only because the northernmost point of the country is 360 kilometers from the Hungarian border by car, but also because the structure of the market is fundamentally different from that of the countries that are typical of our surroundings and generally do not have access to the sea.
In any case, if we take the prices of the countries taken into account by the KSH as a basis, it can be said that Hungarian gasoline is HUF 22 more expensive than the regional average price (3.5%).
while in the case of diesel, the surcharge is HUF 25 (4%).
What shapes prices?
How regional fuel prices develop compared to each other basically depends on many factors: among other things, taxes (VAT and excise duty are the two most important), competition, distance from refineries, gas station traffic, import possibilities and costs, and from profitability, which is also constantly changing depending on demand/supply.
The most important external, variable market factors (i.e. non-endowments such as distance to refineries and import options) in the price of domestic fuels the world market price of oil evolution and the refinery premiums development, and the HUF performance against the dollar. The first two elements are not relevant in the regional comparison, because due to higher oil prices and widening margins, the price of gasoline and diesel may also increase in neighboring countries, but the performance of the forint has a targeted effect on domestic fuel prices. To put it mildly, the past few months have not been favorable on the foreign exchange market:
SO FAR THIS YEAR, THE HUNT HAS WEAKENED BY 6.3 PERCENT AGAINST THE DOLLAR, WHILE THE AVERAGE WEAKNESS OF THE CURRENCIES OF THE NEIGHBORING COUNTRIES WAS ONLY 3.2 PERCENT.
It also plays an important role in the development of fuel prices tax burdens: in this regard, an important event specific to the Hungarian market took place this year, because the increase in the excise duty caused a HUF 42 increase in the price of wells.
The tax increase itself was necessary anyway, but its level could have been lower: the increase implemented in two steps in January was set at a level that is sufficient up to the exchange rate of 420 euros, so in this respect there is some room for maneuver to reduce the burden (currently HUF 393 must be paid for one euro).
Overall though
the tax burden in the case of domestic fuels cannot be called egregious:
the tax level corrected by the EKR fee and the retail tax extent (they are not taken into account in the KSH statistics, which rely on the Commission’s data) based on the MÁSZ data source is 49.1 percent, which is 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.
The domestic on the profit content of oil market players we do not have official data and it would be difficult to compare the procurement cost structures in percentages across countries, however, given the other information, especially the weak HUF, 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.
Country-specific factors
Below we look at what non-market-based, government decisions and burdens affect fuel prices in two countries where the deviation from the regional average is particularly large:
- Austria: the rate of excise duty is much higher than the EU minimum level, exactly 0.482 cents per liter, which is 0.387 cents/liter in our country – the difference is 37 forints based on the current euro exchange rate, but the domestic price advantage from the two main types of tax is reduced by 26 forints due to the lower Austrian VAT, which is 20 percent (compared to the Hungarian 27 percent). If we also calculate VAT, Austrian gasoline should be HUF 11 more expensive due to the two main types of taxes. Meanwhile, other taxes (such as our EKR or the retail tax) also appear on the Austrian market. According to the data source of the European Commission, indirect taxes represent a total burden of HUF 43 per liter on the price of gasoline there, while in our case, due to the EKR and the retail tax at the current price level, there is an additional charge of HUF 27. All in all, therefore (and assuming that the Austrian disclosure of information is transparent to the Commission, unlike the Hungarian one), it can be said that Austrian gasoline should be HUF 27 more expensive only due to the difference in the tax burden – on the other hand “just“The difference is HUF 13. However, this discrepancy is probably not explained by the fact that the Austrian players work with a smaller profit, rather the foreign currency advantage may be the focus (6.3 percent fall of the forint against the dollar this year vs. devaluation of the euro by 2.2 percent), but a possibly more favorable Austrian procurement cost structure is also not excluded.
- Romania: the situation of Romanian fuel market players is also different with regard to the two main types of tax: the Romanian VAT is 19% (27% in Hungary), but the excise tax on gasoline is 0.4 cents/liter (0.387 cents/liter here). The Romanian price advantage resulting from the tax difference comes to a total of HUF 36 per liter – the Romanian VAT on gasoline listed at HUF 586/liter is HUF 93.5 compared to the Hungarian VAT burden of HUF 136, but the difference from the excise tax is HUF 6.5 per liter, the Hungarian in favor of fuel. However, the Romanian market (at least according to the Commission’s data) is not burdened with other tax burdens that are only typical for the domestic market, i.e. there is no EKR obligation (HUF 8/liter) and the 3 percent special retail tax (HUF 19/liter), so Romanian gasoline should be HUF 63 cheaper only due to the difference in the tax burden, which is not far from the reality (HUF 57). However, our industry sources said that an excise tax increase on Romanian fuels is also expected on July 1, 2024, during which an extra burden of HUF 19 will be created in the case of gasoline at today’s lei exchange rate (and HUF 25 for diesel).
Cover image source: Getty Images
