Without a tax cut, the mandatory cheaper price of gasoline can be very painful

Great Martin the Minister of National Economy announced on Wednesday: the government calls on fuel dealers to adjust their prices to the regional average on a voluntary basis. On April 15 in Hungary, according to the experimental statistics published by the CSO on April 19

• the average price of 95-octane motor gasoline was HUF 640, while in regional countries it was HUF 620,
• and for diesel, the regional average price was HUF 654 and HUF 623.

In the regional statistics, the prices of Austria, Bulgaria, the Czech Republic, Croatia, Poland, Hungary, Romania, Serbia, Slovakia, and Slovenia were recorded, based on the latest data from the EU Weekly Oil Bulletin.

Márton Nagy said that the difference between the regional average is HUF 10 for diesel and HUF 27 for gasoline. This is interesting because the KSH indicated a difference of 31 forints for diesel and 20 forints for 95 gasoline. We have not been able to find out the reason for the discrepancy. As of Wednesday, the wholesale price of diesel fell by HUF 8, while the price of gasoline did not change.

The minister strongly asked the traders to reach regional prices as soon as possible, more specifically in the next two weeks. He also put it into perspective that if the government’s expectations are not met in two weeks, then they will intervene with harsh means. By the way, he already approved the intervention on Tuesday.

But how concrete is the expectation that Hungarian fuel prices align with the regional average? We asked market players how to meet this expectation and what motorists should expect.

Not a good starting point

Small gas stations do their best to offer fuel at a competitive price. And we want to use the coming period to check and supplement the KSH’s data series, said the president of the Association of Independent Gas Stations (FBSZ) when asked. Gábor Egri. In their opinion, the KSH data series does not show the regional average, because it includes not only the surrounding countries, but also, for example, Bulgaria and Poland, where Hungarians certainly do not go to refuel. If these two countries were excluded, the “regional” average would immediately be lower, and Hungarian prices would immediately meet the government’s expectations, he noted. If we talk about the region in terms of fuels, then according to him, the neighboring countries should be taken into account, with the exception of course of Ukraine (which is not included in the average now) and Serbia (which is included), because the bio content of fuel in them is not an EU standard (it is less), and the biofuel content increases the price of fuels. Egri would also leave the Czech Republic out of the regional average, because Hungarians don’t go there to refuel either.

Our problem is that the KSH regional average is, to put it mildly, hard work.

We asked whether motorists can expect fuel to be HUF 10 or HUF 27 cheaper? Instead of giving a specific number, the specialist explained that in Hungary, Mol – as the largest market player – sets the wholesale price based on international market prices, to which the retailers also adapt. We asked back: does this mean that they do not meet the government’s expectations. He answered no and repeated: they do everything to make the prices of small wells competitive.

He noted that half of the price of fuel is tax, which the government does not plan to change. About 60 types of items are paid from the roughly 7 percent margin of the wells, including taxes, and there is nothing more to take from that, he stated.

For the sake of clarity, the FBSZ will prepare an in-depth analysis reflecting real processes, he promised.

We stand before the comparison, because we think that Hungarian fuel prices are competitive in themselves, but the tax is around 50 percent.

With less tax, the price would thus decrease

Attila Holoda energy expert believes that what the government expects will not be realized. Not because Mol adjusts the price of fuel to the quoted prices, to the Mediterranean quoted market. There is a difference between the price of crude oil and the price of the product – the wholesale and retail margins that cover the costs of supply and maintenance of the wells, plus any profit. The wholesale and retail margin together is about 14 percent, of which he puts the retail margin at 6-7 percent. When they state that the fuel price is a few percent (3.2 percent for gasoline, 4.5 percent for diesel) higher than the government expects, they are practically saying that gas stations should give up a good part of their margin.

Not to mention that the VAT is around 20 percent in most of the neighboring countries (Austria 20, Bulgaria 20, Czech Republic 21, Croatia 25, Poland 23, Romania 19, Serbia 18, Slovakia 20, Slovenia 22), while in Hungary it is 27 percent. The government also increased the excise tax this year (by HUF 41, i.e. HUF 16-18 more) than the minimum EU requirement. Plus, the EKR is only applied to the price of fuel in Hungary, as if it depends on the gas station how energy-efficient a person goes to refuel with a car. And let’s not forget that the special retail tax for small wells has increased 20 times (from 0.15 percent to 3 percent). Since the latter is a tax proportional to income, the sales tax in our country is not 27 percent, but 30 percent, he listed. If they had only raised less than the excise tax or reduced the VAT to 20 percent, the fuel price would immediately drop below HUF 600, he noted. It is not the retail margin that matters, but the tax content of around 50 percent – he joined Gábor Egri with his opinion.

Attila Holoda also created diagrams to show the composition of the fuel price now and how much the tax reduction would mean. As shown in the first figure, the tax currently accounts for 49.6 percent of the fuel price for gasoline and 48.4 percent for diesel.

If we play with the idea that the VAT is only 20 percent, as in most regional countries, and the excise tax is only at the minimum mandatory EU level, and the retail tax is again only 0.15 percent, as in 2023, then HUF 590 would be gasoline and HUF 575 for diesel.

But they don’t want to touch the tax because the budget is in trouble. However, if the tax were to be reduced, the turnover would increase due to the falling prices, and presumably at least as much of the excess turnover would be received in taxes as was waived in the name of tax reduction, he said. Instead of a threat, he would see it as much more expedient if they moved in that direction.

Just don’t have a price cap again

They did not say that all fuel retailers should reduce the price of diesel by HUF 10 and the price of 95 gasoline by HUF 27, but that the average Hungarian price is that much higher compared to the regional average shown by the KSH, and that this should be corrected in an average of two weeks . Will gas stations take this on? “I think that it is not the individual small gas stations that need to step in, but the dominant market players,” the managing director of Holtankoljak.hu responded to 24.hu. Eszter Bujdos. According to him, it will mostly depend on whether the expectation is met, how Mol determines its wholesale and retail prices in the next two weeks. The Mol wholesaler moves the retail price, the market players adapt to it, large differences in the retail price are not realistic, because it can lead to a serious loss of customers. According to him, KSH’s regional price comparison is not exact either, but a decision must be made based on this. They are once again digging into the pockets of gas stations, waiting for a solution from themhe drew attention. While we know that tax burdens are much higher than elsewhere. Still, they want to take a bite out of the retail-wholesale margin of around 15 percent.

From Friday, Mol will reduce the wholesale price of gasoline by HUF 3 and diesel by HUF 6. That seems like a good first step in two weeks. We suggested that the expected reduction could even be achieved in two Wednesdays and two Fridays. Eszter Bujdos agreed, adding that, in her opinion, Mol also wants to avoid the possible introduction of a price cap again. They have already indicated that they will have maintenance in Százhalombatta in the summer, which may reduce the refining capacity, therefore more imports may be needed. However, if a price cap is introduced, importers are expected to be out of stock again, and fuel shortages may develop.

Whether the government’s expectations are met depends on how the HUF will move against the dollar and how the price of oil will change. If procurement becomes more expensive, it is difficult to imagine a price reduction. Not to mention that the CSO publishes average prices every week, and it is not yet known whether it should be reduced on the basis of the next comparison, and if so, by how much, so that prices in Hungary fall below the regional average indicated by them.Eszter Bujdos believes that the market players will try to fulfill the expectations that Márton Nagy formulated (that is, the motorists may really be refueling for HUF 10 or HUF 27 less within two weeks). At the same time, the expectation of HUF 10 and HUF 27 price reductions is not exact, as it is not known what the regional average will be in the coming weeks.

Another question is how much the possible HUF 10-27 price reduction will change the world, how much it will satisfy motorists’ desire for price reductions. The HUF 70-80 price reduction could have been a big bang, but he doesn’t consider HUF 10-27 to be a big deal. According to him, they only asked for this much because the government also sees that there is no scope for a larger price reduction.

Gergely Gulyás in Thursday’s government briefing, he repeated that if the traders do not comply with the previous agreement (the Hungarian fuel price should be in the regional middle range), the government will intervene, and it is conceivable that a dynamic price cap will be introduced in this case.