Fuel Supply Shortages Show Disruptive Effect of Price Cap

Petrol stations across the country experienced fuel shortages this week in the face of record demand. The government-imposed price cap on motor fuel is forcing an increasing number of gas stations to close down.

Long queues were forming at gas stations across the country this week and there is a growing number of petrol stations where there is no fuel, while some others have closed. These incidents are not entirely unexpected, as analysts have warned that the mandatory cap on fuel prices may lead to shortages and force some petrol station operators out of business.

Limit on prices
Hungary’s government capped vehicle fuel prices for retail consumers at 480 forints per liter in November to dampen the impact of spiking inflation. The measure was later extended until May 15. As oil prices continued to rise on the international market, petrol stations in Hungary starting racking up significant losses as they were often forced to sell fuel below wholesale prices. As a response, the government announced on March 1 that it was capping the wholesale price of petrol and diesel at 480 forints a liter to contribute to the more competitive operation of retail gas stations. No other costs or fees may be charged and the supplier, in most cases national oil company Mol, may not refuse to enter into a contract with the retailer applying the official price, the government said.
Prior to the introduction of the cap on wholesale fuel prices, some petrol stations implemented volume restrictions, especially as truck drivers and consumers from neighboring countries took advantage of the price cap in Hungary. Shell, for example, introduced a 100-liter limit on any type of fuel purchases at twelve stations along main transit routes in Hungary.

Limits on fuel purchases
On March 2, oil and gas company Mol, the operator of the largest fuel station network in Hungary, announced that single purchases at its regular gas stations would be capped at 100 liters. The company said it was implementing the measure as demand for fuel from gas stations had risen to record levels. For gas stations with a larger turnover, the cap was set at 500 liters per purchase. Mol did not specify how long the measure would remain in place.
This week, Shell announced further restrictions at its filling stations in Hungary. According to a statement issued by the company, there will be a HUF25,000 limit on petrol and diesel purchases per passenger car at 30 Shell stations in Budapest and 76 stations at other locations in Hungary. The 100-liter limit on top-ups at the twelve Shell stations on international transit routes, in effect since February 22, will remain unchanged. Shell Hungary said the move was necessary due to “record demand for vehicle fuel” at its petrol stations, lifted by petrol tourism and the start of the agricultural season.

Out of fuel
News website Telex reported that on Tuesday and Wednesday, several petrol stations across the country were forced to close down or significantly reduce the amount of fuel they dispense due to supply shortages. At some stations, the limit was five liters of fuel, while others said the next supply of fuel was scheduled for 24.
Meanwhile, global energy prices continue to rise and the market price of petrol would be HUF 640 per liter while a liter of diesel would cost HUF 717 forints had the 480 forint price cap not been in place.
In addition to people from Slovakia and Austria coming over to Hungary to buy fuel, demand is also boosted by the start of the spring agricultural season. To ensure that the agricultural sector is not affected by any fuel purchase restrictions, the government decided that filling stations must serve lorries, tractors, and agricultural machinery with a weight not exceeding 3.5 tons without any limitation on the quantity they want to purchase.

Logistical problems
Mol, which is the largest wholesaler of petrol and diesel in Hungary, said in a statement that the supply of crude oil to Hungary was stable and Mol’s stocks and refinery capacity were sufficient to meet the country’s demand for vehicle fuel. The company’s inventories and production offer a stable foundation for uninterrupted supply, they said.
Reiterating the same message, Mol Chairman Zsolt Hernádi told television channel ATV that incidents of supply shortage are “an unpleasant occurrence that we have to survive.” He noted “there is no supply problem, there are momentary logistical problems.”
The amount of incoming crude oil is unchanged and the transit from Russia through Ukraine via the Friendship pipeline is uninterrupted, the executive said. Should transit problems occur in Ukraine, Mol could ensure its crude supply via the Adriatic pipeline through Croatia. For this, however, tanker ships would have to be ordered and this would take time. Hungary has fuel reserves for 90 days, in line with EU regulations.