Anti-Communist Central Planning

Fuel price control leads to fuel shortage. Always.

And the war is not to be blamed.

Every time I decide to write up the fuel price cap farce, it gets richer. At this point in time there is a massive fuel shortage at gas stations, many of which are closed down or severely limit the amount of fuel one car can purchase.

And it is not even a supply shortage. There is enough fuel in the country – but the government interfered in the market and tried to force companies to sell fuel at a loss. It didn’t work.

It wasn’t for the lack of trying. When Orbán issued the original decree to limit the price of fuel at gas stations to 480 HUF per liter (approx. 1.28 euros, but the exchange rate is also hectic) starting on the 15 November 2021, he also made sure to close any loopholes that would let gas stations off the hook and force them to swallow the losses.

  • Gas stations were not allowed to shut down (to avoid the losses) or a designated crony gets to take over their business. (The crony was miraculously ready with the paperwork to apply for the privilege by the time the decree about the tender was out.)
  • They must not reduce their opening hours either.
  • They are not allowed to run out of fuel, lest they pretend to be out of fuel just to avoid losses.
  • If they don’t sell the fixed priced stuff for more than 48 hours in any given week, they must close down. Not just the fuel station, but every other part of the operation. They must not make money elsewhere. (Also, the crony gets their business.)
  • A designated fuel price enforcement action group will check the gas stations because we don’t have any better thing to do and we can so afford yet another pricey institution that will never die.

Orbán proudly announced the communist-era price fixing on his own, precious Facebook (even before it was announced). It was part of a bigger election giveaway, complete with 13th month pension and tax returns to be delivered in February (just in time for the April elections), mortgage moratorium and interest rate cap for debtors (until after the elections), price control on energy and utilities (since 2014) and various long overdue salary rises in the public sector. Most of these perks were timed to expire after the elections – but the fuel price control had no time limit. (It was only added in the follow-up law in December.) A government spokesman proudly announced that this trick alone will reduce the headline inflation data by 2%. (Just in case you were wondering whether it was a political move to sweeten things before elections.)

Gas station owners didn’t even know for how long they have to watch their savings disappear, one tankful at a time. They were begging for some certainty. Should they keep covering their losses from their family savings to avoid losing their businesses or should they cut their losses and give up? How long is this going to last? And why are they made to swallow the losses? Why does the government not reduce the record amount of tax on fuel instead?

There was also a sick side effect to the price control: the better quality fuels disappeared. It is a long-term problem for engines and lungs so who cares. But still.

Farcical situations ensued almost immediately. (Farcical if it is not your family livelihood, that is.) Small business owners were begging their customers to go refuel elsewhere. Some started to limit the amount of fuel they served at a time. In five liters – many remarked it’s just enough to hit the next gas station down the road. For the time being because they started shutting down and entire regions were cut off from fuel.

Mid-December they announced that the fuel price stop will last until at least mid-February. But who were they kidding, the elections are in April so no one seriously believed that they would not be extended beyond that. Small businesses were now in an even deeper mud. Is the government telling the truth and they can breathe after February – or is it lying as always.

Lying as always. Of course the price cap was extended. By three more months – or until after the elections.

By February small gas stations started going out of business but the government still didn’t want to swallow the losses it created. They need the money to overspend and to feed their cronies. Small businesses were not helped – but the fuel price commando was belligerently traveling the country and handing out fines to those who sold fuel at market price. Just like in communism.

Actually, Hungarians spent forty years under communism and a planned economy where every price was controlled and therefore everything was in shortage. All the time. You don’t have to explain here that price fixing leads to shortage – unlike to some naïve westerners. But yeah, sure, Orbán is the free market champion for some deeply treasonous western right wingers who crave autocracy in their countries. In the US they are called Goulash conservatives these days and they lionize this guy. I guess it’s easy if they don’t add the facts.

Anyway, the fuel price cap was extended and by late February mass bankruptcy was threatening Hungarian gas stations. The Russian war on Ukraine was a godsend to Orbán for many reasons. Blaming the fuel shortage on it was one such reason. And using the lack of attention to shift the losses from gas stations to wholesalers was another.

But that move didn’t work as expected and the farce continued. Only one wholesaler seemed willing to oblige and sell fuel to gas stations under the market price: the national champion MOL (or is it national any more if its shares are all given to Orbánist asset management companies as a gift?) led by Orbán’s ally, who is also terribly grateful since he is on the Interpol wanted list and Orbán is sheltering him from going to jail in Croatia. Shell, OMV and others didn’t join in the game to rescue Orbán’s reelection.

Long lines at gas stations and actual fuel shortage ensued. The scenes are now truly embarrassing for any government so yet another decree was coming, banning whatever didn’t work last. This time the government decided to micro manage who can get how much of which fuel. Meaning that the gas station operators should somehow police the weight of the cars, their nationality, and whether they are professional drivers or in logistics – and ensure that no car lines up in the wrong line to fuel the cheap gas. If you ever worked as an employee, you know that confrontation with clients is not the kind of job you are willing to do voluntarily. Nor did gas station owners know how to police cars and enforce the government-issued cheap gas decree on them.

Foreign cars line up happily for the subsidized gas and ambulances are begging to be let ahead in the mile-long lines. But it is not up to the drivers beyond a certain point as no gas station was built with mile-long lines in mind.

MOL was the only wholesaler willing to supply fuel at this price, but they didn’t want to serve all the traffic that suddenly fell on their gas stations – now that others stopped delivering completely. MOL also came up with a limit: they decided only to deliver 10% of the annual contractual amount to every station per month. Which would not be a big deal normally (except that it is Spring and tractors are getting ready to work). But the demand at MOL stations is not normal because all other customers are also lining up at their pumps. They also only serve 100 liters at a time.

The war also broke the currency which didn’t help with the price. Instead of the fixed 480 HUF they should now be selling at 600-640. But the government blames everything on the war nonetheless. Inflation, fuel shortage and then some.

The central planning campaign comrades up in their cushy seats in Budapest didn’t rest. There is nothing a central planner won’t try to fix with yet another rule.

On March 10 a new decree loosened the energy efficiency rules and allowed smaller stations to deny fuel to large vehicles and trucks. They claimed to clamp down on fuel tourism from neighboring countries and came up with detailed nationality rules for cars that the gas stations must enforce. They even lower taxes on fuel at long last. They also gave press conferences and claimed with a straight face that there is no shortage or supply issues. Must be a Jedi mind trick or something.

Orbánist politicians suggested that the opposition should not refuel these days as they are against price caps (according to Orbán’s propaganda). In truth, Orbán can claim whatever he wants about the opposition and their program. (Oh right, that’s the Jedi mind trick. Owning the entire media.) His own voters will only hear it from him so it doesn’t matter that even the opposition doesn’t dare to say that fuel prices should go up. Not even after this communist nostalgia month.

2 thoughts on “Fuel price control leads to fuel shortage. Always.

  1. “Most of these perks were timed to expire after the elections – but the fuel price control had no time limit.” It was for three months and then was extended to another three months (as is explained elsewhere in the article). The contradiction is untidy/ confusing.

    Like

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