Hungary scraps fuels price cap

Belgium, (Brussels Morning Newspaper) Hungary has scrapped the price cap on fuels introduced last year as a wave of panic-buying caused fuel shortages.

Minister of the Prime Minister’s Office Gergely Gulyás announced at a press conference late on Tuesday that the price cap would be scrapped at 11 p.m., according to AP reporting on Wednesday.

Hungary introduced the price ceiling in November last year to cap fuel prices at roughly 1.17 euro per litre, which strained state-owned oil and gas company MOL’s ability to keep up with demand.

According to Gulyás, the Hungarian government had to scrap the price cap due to EU sanctions against Russia.

Consumption of fuel in Hungary increased approximately 25% this year compared to 2021 and MOL faced production issues at the Danube oil refinery, which made it difficult for the company to supply petrol stations with enough price-capped fuel.

“The government maintained the price cap as long as it could,” Gulyás stressed and added that scrapping the cap will likely add to rising inflation which has exceeded 20% in Hungary.

Earlier on Tuesday, MOL warned in a statement that logistical challenges made it impossible for the company to continue supplying petrol stations, noting that rumours of shortages sparked panic buying.

MOL CEO Zsolt Hernádi pointed out that Hungary has not seen long lines at petrol stations since the end of the communist rule in the country.

Two months to restore stability

He stressed that roughly 25% of MOL’s stations were completely out of fuel and predicted that the company will be able to restore imports and stability in up to two months.

Foreign suppliers cut shipments to Hungary since the country introduced the price cap, which exacerbated the country’s problems, according to Reuters reporting.

Hernádi concluded that lifting the cap would alleviate fuel shortages in a matter of days.

Gulyás stressed that doing away with the cap “is the only way to ensure the security of supply,” reiterating that the Danube refinery was running at approximately 50% capacity due to maintenance.

Commenting on food price caps, Gulyás noted that the government has not decided whether to maintain them in 2023, pointing out that the measure caused similar shortages of flour, sugar and other staples.