Fuel shortage has become serious, subsidised fuel prices will likely have to go

HUNGARY - In Brief 05 Dec 2022 by Istvan Racz

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By last night, about a quarter of domestic petrol stations has run out of petrol and diesel, and the situation is threatening to get even worse. We have had this coming for a while. MOL, currently the only wholesaler of fuel in Hungary, has been saying for several months that its capacities are overstretched, and in case of any supply bottleneck, it easily may become unable to secure all the fuel needs of the domestic economy alone. Until November 2021, when subsidised retail fuel prices were introduced, there were four big wholesalers and a number of smaller ones in Hungary. But the government then placed the burden of the subsidy almost entirely on wholesalers and retailers, and all of the latter, except for MOL, which acts as a company with national responsibility, withdrew from supplying the local market, in an effort to avoid massive losses on the business. MOL actually does all right financially, as it buys relatively cheap Russian oil, and the discount Russia offers covers almost the whole financial burden of the subsidy. But that does not solve the capacity problem. Immediately, the shortage is caused by a combination of adverse factors, including an ongoing maintenance at Dufi, MOL's only local refinery, a recent rocket hit at the Ukrainian section of the Friendship pipeline that comes from Russia, and massive domestic demand, driven in a great part by hoarding and informal arbitrage between the full price and the subsidised price. The ongoing stage of Dufi's maintenance should have been completed on December 2, but a leak was still discovered on the occasion of a pressure test, and so the deadline for the works was put off to December 6-7. Until then, the ref...