Fuel prices in Hungary have been rising, and experts predict that this trend will not stop any time soon. Discover the reasons behind this trend and how it will affect your finances.
The Fuel Price Trend
For the last several months, fuel prices in Hungary have steadily been rising. Reports from July and earlier were already alerting Hungarians about the price hikes and setting expectations for fuel prices to increase further. By the middle of August, prices had indeed risen with predictions that it would continue.
What Caused the Increases
Many factors have led to Hungary’s fuel prices, which are easily among the highest in the region.
Oil Transit Fees
The most recent hike in Hungary’s fuel prices was a result of increased oil transit fees. Hungarian officials announced in mid-September that the Ukrainian oil transit fees increasing dramatically directly affected the fuel prices. Those oil transit fees added 0.5% to the already-growing inflation.
The Prime Minister’s Chief of Staff, Gergely Gulyas, said that importing fuel costs five times as much as it used to when using the Ukrainian pipeline. According to Gulyas, Ukraine charged Hungary 3.5 times the benchmark rate. While the rate of increase is a surprise, the fact that there is one is not. In March, sources reported that Hungary would have to pay Ukraine for Russian oil passing through the country’s portion of the pipeline.
While the Ukrainian oil transit fees are blamed for the most recent increase in fuel prices, other factors are also at play. Last month, experts blamed the drop in oil production by Russia and Saudi Arabia. At the time, Századvég energy department head, Olivér Hortay, called OPEC’s decision “economically and geopolitically unfavorable for Western countries.”
Experts said that OPEC tightened their supply in September to increase fuel prices. This brought the cost to $85 per barrel, up from $70 to $72. But as of October, experts said that the increase in barrel price was potentially stabilizing.
In addition to increases in oil supply costs, the forint’s exchange rate also plays an important role in Hungarian fuel prices. Some experts are concerned about what would happen to fuel prices if the US dollar continues to strengthen, as the forint could weaken due to being overvalued.
Increased Excise Taxes
Starting next year, excise taxes on both gas and diesel will increase by 41 forints gross per liter (0.11 Euro). The government says this is a reasonable increase as Hungary’s excise tax has been the lowest in the EU for a while. Additionally, it will help fund the government’s budget. Even so, it will affect fuel prices.
What It Means for Hungary
Hungary holds an important role as a major transport hub, with truck drivers using most of the fuel. If Hungary’s fuel costs become higher than those of nearby Austria or Slovenia, the effects could hurt the economy. It could lead to truck drivers fueling up in those countries or even changing their routes. That being said, Austrian fuel prices, for both gas and diesel, have always been higher than Hungary’s, so this may not change.
What It Means for You
Those living in Hungary or investing in the country will need to keep these rising fuel costs in mind and budget accordingly. You will have to plan for increases in fuel prices, so you can plan your investments and travels or even your daily commute.
Remember that as fuel prices increase, so do other costs. After all, fuel costs affect the price to ship goods.
Hungarian fuel prices have been steadily rising due to OPEC reducing oil production, the weak forint, and new oil transit fees. There will also be an excise tax increase starting in January, furthering increasing fuel prices. The best course of action for Hungarians is to budget accordingly.
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