Fuel price change coming up in Hungary

Price cut ahead

The wholesale gross list price of 95-octane petrol will be trimmed by HUF 3 per litre and diesel will also be that much cheaper on Wednesday (1 May, which is a public holiday in Hungary). Accordingly we should find the following (average) prices at the pumps: 

• 95-octane petrol: HUF 644 /litre
• Diesel : HUF 630 /litre

By Wednesday, the (average retail) price of 95-octane petrol will have gone up HUF 74 (+13.0%) per litre since the end of 2023, while the growth in the price of diesel will have been HUF 37 (+6.2%).

What factors are affecting the prices?

How fuel prices change at Hungarian petrol stations depends on many things. The most important external market factors are the development of world oil prices and refinery premiums, and the performance of the forint against the dollar. But tax burdens also play a significant price-determining role (VAT and excise duties being the two most important), and the degree of competition, distance from refineries, turnover of the pumps, import opportunities and costs, and profitability also shape prices.

The price of oil has risen sharply this year due to increasing geopolitical tensions, with the biggest threat at the moment being the potential escalation of the Iran-Israel conflict. Iran, a key oil producer, could in the worst-case scenario block the Strait of Hormuz, a key link in the global oil trade, but an Israeli air strike on Iranian refineries would also send oil prices soaring. Brent, the western benchmark oil product, is up 13.5% so far this year, but since mid-April we have seen a small correction in the price.

In parallel, the purchase price of petrol and diesel both rose sharply in the first weeks of the year, but the situation changed in mid-February and since then we have seen a sharp fall in the diesel premium, while the refinery margin for petrol continues to rise alongside smaller pullbacks.

In any case, in the past few weeks, since the beginning of April, the purchase price of diesel has fallen sharply, and we have seen this at Hungarian petrol stations, mainly because of this,

a litre of diesel costs 14 forints more than a litre of petrol.

The forint's performance has a targeted impact on domestic fuel prices, which means it can also be an important tool in regional price comparison that has been in the spotlight in Hungary recently. In fact, the past few months have not turned out favourably for the forint, to put it mildly:

SO FAR THIS YEAR, THE FORINT HAS WEAKENED BY 5.7% AGAINST THE DOLLAR, WHILE THE AVERAGE DEPRECIATION OF THE CURRENCIES OF THE NEIGHBOURING COUNTRIES HAS BEEN ONLY 2.9%.

The tax burden also plays an important role in the development of fuel prices: in this respect, an important event specific to the Hungarian market occurred this year, as the increase in excise tax led to a HUF 42 rise in the price of petrol/diesel per litre at the pump.

The tax increase itself was necessary due to EU rules, but its level could have been lower: the two-stage increase implemented in January was set at a level sufficient to cover the EUR 420 exchange rate, so there is some room for manoeuvre to reduce the burden (currently 392 forints per euro).

But the really interesting thing about the tax rates is that the tax content adjusted for the EKR fee and the special tax on retailers is

NOT TOO HIGH COMPARED TO THE NEIGHBOURING COUNTRIES,

with the 48.7% tax rate calculated from the Hungarian Petroleum Association (MÁSZ) data source is very close to the regional average of 49.3%. The domestic situation is slightly less favourable for diesel, where the tax rate for Hungarian fuel is 47.6%, compared to the average of 46.1%.

Cover photo: Getty Images