Hungary's Economy Minister Calls on Fuel Traders to Voluntarily Adjust Prices

Hungary's Economy Minister Marton Nagy has called on fuel traders to voluntarily adjust their prices to match the regional average within the next two weeks. The minister's request comes amid concerns over rising fuel prices in the country compared to the regional average.

During a news conference on April 25, 2024, Nagy stated that the prices of 95 petrol and diesel are currently higher than the regional average by 10 and 27 forints per liter, respectively. The government has given fuel retailers a two-week deadline to comply with the request to align their prices with the regional average. If prices remain above the regional average after the deadline, the cabinet has threatened to undertake "stringent measures" to address the issue.

Nagy noted that the Hungarian Petroleum Association (MÁSZ) has already concluded an agreement to keep fuel prices in Hungary at the regional average. The state-owned oil and gas company Mol has also reduced diesel prices to 633 forints and petrol prices to 647 forints over the week, in line with the government's request.

The government's call for voluntary price adjustments comes after it scrapped a fuel price cap in December 2022, which had led to fuel shortages due to a lack of imports and panic buying. At the time, the government promised to intervene again if fuel prices rose above the regional average.

Why this matters: Aligning fuel prices with the regional average could help trim 20 to 30 basis points off Hungary's headline inflation, which stood at 25% in the first quarter of 2022, the highest in the European Union. This move could increase the chances of the central bank continuing with 25 basis point rate cuts per meeting in the third quarter of 2024, according to a Morgan Stanley economist.

The Hungarian government is closely monitoring price developments and has involved the Central Statistical Office (KSH) to set up a public system for monitoring regional fuel prices. Minister Nagy emphasized that the government is urging all fuel retailers to reach the regional prices as soon as possible to protect families from the impact of high fuel costs.

Key Takeaways

• Hungary's economy minister calls on fuel traders to match regional average prices.
• Fuel prices in Hungary are 10-27 forints higher than regional average per liter.
• Fuel retailers given 2-week deadline to comply, or face "stringent measures".
• Aligning fuel prices could trim 20-30 basis points off Hungary's 25% inflation.
• Government closely monitoring prices, involving statistics office to set up price monitoring.