How do we raise petrol prices by 33% without political risk?

Galgóczi Eszter – Vető Balázs

Since 15 of November 2021, the fuel price capping rule has been in force in Hungary. Although the number of people eligible to benefit from the rule has been narrowed several times, the majority of Hungarian drivers could get petrol or diesel at HUF 480.I mean, if you could get it. In the last quarter of 2022, we heard more and more often that it was not possible to get officially priced fuel at a significant number of wells.And one of the leading news stories of the first days of December was that there was almost no official price fuel, or any other type. Most experts believe the shortage is caused by price controls. How can this situation be resolved without blaming the Orbán government?

The answer is not clear. There has long been a consensus that the shortage of petrol was caused by the price cap. International operators cannot import regular fuel because its market price is higher than the capped price.A for-profit company cannot take on such a large quantity for a long period of time. In addition, as Zsolt Hernádi said at Corvinus University a few weeks ago, Mol was unable to operate its refineries at full capacity in recent months due to technical problems, and therefore was only able to supply domestic wells to a limited extent, with even minor breakdowns causing serious disruptions.This is compounded by the fact that Russian oil pipelines are unable to operate at full capacity due to war damage.

Of course, according to economics, price controls lead to shortages in the market economy even without technical problems and wars, because there are rules of the relationship between supply, demand and price that have been shown many times to work in a certain way, even if unorthodox economic theory is in vogue somewhere. If these were taken into account, the question of the correctness of government decisions would obviously also arise, so they would be less highlighted in government communications or even in the pro-government media.

These were not even mentioned when, at the height of the petrol shortage on the 6th of December, Gergely Gulyás suddenly announced a Government Info with Zsolt Hernádi at 22.30. Here it was announced that the government would abolish the official price of fuel from 23.00 on the proposal of Mol. By the time the minister and the CEO of the oil company had finished speaking, the price of petrol had risen from 480 forints to 641 forints and diesel to 699 forints.So despite the long queues at petrol stations, motorists who have started to drive on the news of the government information can only fill up at increased prices. The stranded car owner, who has been unable to fill up for days, is obviously furious and is probably wondering who is responsible. Who should he be angry with?

At his press conference, the Minister of the Prime Minister’s Office was ready to help with the answer, saying that the EU oil sanctions that came into force on Monday had created a supply problem, which is why Mol cannot meet Hungarian demand without imports. The company’s CEO reinforces this by saying that the price cap was introduced because of the sanctions and that the sanctions made it untenable.Gulyás adds to this when he says that the EU’s response to Russian aggression has also led to higher fuel prices. Brussels and its sanctions are to blame.

At this point, however, it is worth recalling that the regulatory price was introduced by the government on the 15th of November 2021, while Russia attacked Ukraine in February 2022.

But these facts are secondary, from a political communication point of view, the important thing is that the name of the person responsible has been mentioned. After all, voters will only blame the government for economic difficulties, and will only side with it if they are clearly the fault of the government or if the government has failed to prevent them. If Brussels is to blame, there is no political risk for the government in taking this step.

The announcement also prepared a message of deflecting discontent over rising fuel prices. After all, Mol would be able to produce cheap petrol in Hungary if the war ended and sanctions were lifted. But since the EU’s “misguided sanctions” prolong the war, we have to import expensive Western fuel to have enough to fill up our pumps. Hernádi was clear: “Ladies and gentlemen, it is not good if something is expensive. It is much worse if there is nothing”.

And while we’re on the subject of price: the abolition of the official fuel price also means a big help for the budget through price increases. After all, taxes on fuel are a percentage of the price, so the more expensive the petrol, the more tax revenue the budget receives. And fuel is likely to be sold in large quantities, as there have been shortages at the pumps for weeks, with limited quantities available, meaning that many cars have empty tanks and Christmas, one of the biggest travel seasons, is approaching.

So citizens are using their own money to plug holes in the budget. This means less money for Christmas preparations and presents.

And for this situation – thanks to government propaganda – the masses will blame Brussels and the sanctions. And Viktor Orbán can prepare for a peaceful Christmas, as his political support and power are not threatened by the 33% rise in petrol prices. He can lean back in his armchair and perhaps even text Ursula von der Leyen while munching on a few slices of bejgli: “So good to have you”.


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