Hungary to impose fuel price cap as inflation bites
Hungary will cap gasoline and diesel prices from Monday as the country tries to control rising inflation, Prime Minister’s chief of staff Viktor Orban said on Thursday, ahead of what is expected to be an election tight next year.
“We made a decision: the price of gasoline and diesel cannot exceed 480 forints [€1.30]Orban said on his Facebook page. The caps on gasoline and diesel will last for three months.
European consumers have been confronted with rising energy prices amid tighter supply in recent months. Oil prices in Hungary have reached record highs, climbing by around a third since the start of this year. Annual inflation has also risen steadily despite a series of central bank interest rate hikes, reaching 6.5 percent in October.
The energy price cap will help Orban say ahead of April’s election that he is curbing inflation, analysts say.
“Fuel is an important part of inflation, and this rapid movement means that the fall in prices will already show up in the November inflation reading, which can thus remain below 7% per annum,” said David Nemeth. , economist at The Hungarian bank K&H.
“Then from December it can help keep inflation constant, which also helps monetary policy. Of course, elections are also a factor, as voters keenly sense fuel prices. “
Orban, who has often imposed tough measures on international companies and challenged fundamental EU policies, has long used energy price caps. Households in the EU member state pay a limited amount for natural gas and electricity and Orban has often said he will “stop price increases at the border”.
Nemeth said energy price ceilings could become unaffordable for Hungary if market prices remain high over the medium term, but added that any revision was only likely after the election.
Shares of Hungarian refiner MOL, which operates the country’s largest network of gas stations and the second-most liquid stock on the Budapest Stock Exchange, fell 6% after the news, before leveling off at a loss of 4 % for the day.
Lajos Torok, of brokerage firm Equilor, told the national news agency MTI that the price cap could cost MOL between 120 and 180 million euros, depending on world oil prices.
MOL declined to comment before details were announced on how the price cuts would be achieved. The government decree, which takes effect on November 15, is expected to be released on Friday.
According to the European Environment Agency, Hungarians already pay the second lowest excise taxes on gasoline and the fifth lowest on diesel in the EU. They also paid less than the EU average at the pump: around € 1.40 per liter compared to an EU average of € 1.66, Eurostat said.
The price cap would bring prices at the pump to the second lowest level in the EU behind Bulgaria.
“Energy issues are bad in Europe,” said Gergely Gulyas, Orban’s chief of staff, noting that natural gas prices had quintupled in a year while electricity prices had doubled. “This has led to a price crisis in public services which European countries, with the exception of Hungary, have not been able to avoid.”
Croatia introduced a similar fuel price cap in October, limiting the retail price of gasoline and diesel to around € 1.50 per liter. The decree was extended for a month on Thursday.
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