Refinery fire to affect inflation prospects, reduce potential for cutting the base rate

HUNGARY - In Brief 22 Oct 2025 by Istvan Racz

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New information regarding yesterday's fire at MOL's oil refinery suggests that the plant has temporarily lost about 40% of its productive capacity for a yet unknown period. Initial estimates for the time required to repair the damaged capacities range from a few weeks to several months. As we said last night, a more accurate assessment of the damage will be available only later. As a consequence, the approximate cost of repair is also unknown at this moment. But experts tend to say it will be 'significant'.A key question is if MOL and the government, its controlling owner, will swallow all the cost of repair and the losses caused by the partial stoppage of the refinery. Initial expert views suggest it is unlikely: the company and the government will probably cover these costs and suffer the losses partially, but some part of all the burden will be very possibly passed on to consumers.Should this happen, it would affect inflation prospects negatively for H2 2026 in the first place, in our view. Experts pretty much categorically deny that the fire could lead to supply problems that would require the reduction of domestic fuel consumption. Hence, there would be no need for immediately raising fuel prices, which is no doubt a highly sensitive issue ahead of the election. But H2 2026 will have to be a period of fiscal adjustment, whatever government arises from the national vote in April.We think that even the uncertainties around the case should be enough to push the MNB into a super-cautious mode regarding interest rate policy, if it is not already there in view of other problems.In some good news, initial expert views exclude the possibility that the fire could have affe...