On Tuesday night the Minister of the Prime Minister’s office Gergely Gulyás held an extraordinary press brief at 10:30 p.m. to make announcements in connection with the temporary fuel shortages at the country’s petrol stations. Gulyás was joined by MOL Chairman-CEO Zsolt Hernádi.

‘What we feared has become reality,’ Gulyás declared. The minister then announced that due to the fuel shortage experiences throughout the countries, the government is scrapping the price cap on fuel as of midnight, as MOL recommended. MOL had informed the government that without imports they are not able to meet the fuel demand in the country and encouraged the government to lift the price cap. Gulyás stressed that the price cap imposed by the EU on Russian oil this Monday is the main cause of the supply difficulties in Hungary.

Zsolt Hernádi recalled that the last time filling stations were this close to being completely empty was in the seventies, before MOL’s time. He said: ‘We went to the wall, but this is all we could do,’ stressing that because their reserves had run out, they were unable to supply orders in the hundreds. Hernádi also said that he expects another critical period in about two months, since the effect of the punitive measures imposed on Moscow will reach Hungary around February. He estimated that at that time, around ten per cent of the necessary diesel will be missing from the European market. He continued by stating that Ukraine has no sufficient electricity or fuel to continue running their pipeline. There are alternative solutions, however, and Hungary ‘needs to prepare for implementing them.’ Hernádi added that imports need to be restarted, and the reserves refilled, but that does not happen at the snap of a finger, he warned. He expressed his conviction that trust needs to be reinstated between market actors. If that happens, by the start of the new year, Hungary should have sufficient fuel reserves. Hernádi added that he expects that the lifting of the price cap will have an almost instant effect, with consumers seeing stability of supply return in a month. The current panic reactions will also ease shortly, he reassured the public.

Inflation Could Rise

Gergely Gulyás warned that inflation will rise after the deletion of the price cap, since although Hungary has been exempted from the oil sanctions, it relies on imports, meaning that it will be forced to buy fuel at an increased price. He added that the prices have skyrocketed as a result of the sanctions on Russia. When asked whether the government was considering scrapping other price caps currently in place, he said that all caps make sense until there is a sufficient amount available of the product whose price is limited. If another commodity become too scarce, its price cap will lose its real value.

Sanctions Need to Be Re-evaluated

Looking at the facts, it is clear that while the price cap substantially helped the Hungarian population for the last 13 months, it has become unsustainable due to the most recent sanction. As Prime Minister Viktor Orbán said on Tuesday: ‘If we want the European industry to survive, we must address the European energy crisis swiftly. It is high time to re-evaluate sanctions.’ As the Hungarian government has pointed out on many occasions, sanctions continue to hurt European countries as much as they do Russia, and in some cases even more.