Hungary receives Russian gas much more expensively than other countries G7
By now, it has become completely clear that Russian gas is directly expensive for Hungary, even in an international composition. For a few months, the unfavorable prices could still be explained by contractual differences, but now it turns out that we pay the most even in the long term. It also doesn’t help that most of the last countries buy less in the second half of the year, at higher prices, this was not the case here.
The market price is twice as good
Although the average price of Russian imported gas in Hungary decreased a little in November, it did not remain, however, far from the historical peak of a month earlier. According to Eurostat’s foreign trade statistics, one cubic meter arrived in the country for almost two and a half euros on average, or HUF 965 at the exchange rate of that time. In contrast, in the same month, the market price was much cheaper: the average stock market listing*In the spot market. The forward quotation, i.e. the quotation for delivery one month later, did not fall as much, but the average price even there barely exceeded half of the Russian import. it did not reach the one euro.
Earlier already several times we wrote about him, that the price was much higher than the market price is not at all surprising, in fact, it is a law that there will be such a period. The largest domestic importer is certainly the state-owned MVM group, which purchases natural gas from Russia’s Gazprom under a long-term contract. Thus, the conditions of this agreement are mainly the domestic import price. Although the details of the contract have not been made public, it is now known that its pricing follows the stock market listings with a two-month lag. In other words, in October we had to pay based on the stock exchange price in August, and gas was the most expensive on the stock exchange at the end of summer.
The situation was similar in November: the market prices were also much cheaper than two months earlier (i.e. in September), so the delayed pricing was a disadvantage.
Different contracts
However, this is normally only a temporary situation, since if the stock market quotations rise again, then the offset-priced Russian gas will become cheaper again, as we saw this, for example, in the summer. In other words, in the long term, these effects balance out.
From the point of view of judging the Hungarian import price (and thus presumably the Gazpro contract), it is therefore concluded that a better approach is to compare it to similar prices in other countries instead of capital quotations. The bad news, however, is that we still have to pay a lot.
In November, for example, Russian gas was the most expensive here.
Even the Latvians, which are in second place, have 7 that arrived cheaper and one that arrived cheaper than in our country, and the EU average price was a fifth cheaper in Hungary*Unfortunately, not all countries publish gas import data from Russia and other countries..
Of course, this could be any case, since due to the different conditions of the various contracts, better and one-off months may occur everywhere internationally. As you can see in the figure below: there are indeed groups of countries where prices move together. In the case of Italy and Greece, for example, there was a price or a decrease in the same months, and with the exception of the Czech Republic, the same can be said about the states of the Eastern European region as well.
In such spectacularly moving blocs, similar similar contracts determine import prices. That is, the most important agreement in the given countries is to tie the price of Russian import gas to the same or a similar benchmark (in many cases to a stock market listing) and with a suitable time delay. Starting from the Hungarian contract, in Eastern Europe, for example, with a two-month delay to the Dutch stock exchange.
We buy a lot at high prices
In such cases, the difference may be in the mark-up or reduced price determined by the given contract compared to the quoted stock market price. Of course, since gas is not only imported within the framework of one contract in individual countries, the foreign trade data can be distorted by many things, but the agreement between MVM and Gazprom does not reflect well that
At home, the price of Russian imports is usually among the gas prices.
not only in our own block, but in the entire union, and not only in individual months, but also in the longer term.
In the six months before November, Russian gas arrived in Hungary 15 percentage points more expensive than average. And for the entire year 2022, the difference is even bigger, almost 30 percent.
The fact that the vast majority of EU countries bought much less Russian gas in the second half of the year – by their own decision or due to the execution of deliveries – also plays a major role in the latter very significant difference, this was not the case in Hungary. In other words, the most expensive Russian gas came to us more than to other countries, and of course this also raised the average prices.
The large volume of Russian imports in October is also strange, because at that time there were already Hungarian market players, and thus MVM also had the opportunity to buy large quantities of gas from the West at a much cheaper price. There were signs of that, that westward imports have picked up, and foreign trade data also show some growth, but not as significant as might have been expected. This indicates that the MVM was not really able to reduce the supply of the population with the favorable situation resulting from the significant storage capacity and cheap westbound purchases, which serves the average purchase price of gas.
