Hungary can keep the fuel price cap in place after January 1 only if oil from Russia is supplied without interruption and the Mol refinery in Sajalombatta operates continuously, the Budapest government said on Monday.

In November 2021, the Hungarian executive established that petrol and diesel prices cannot exceed HUF 480 (€1.18) per liter at gas stations, which is more than HUF 500 below current prices. Due to supply problems, Hungary had to remove restrictions on fuel prices for companies in July.

“We can maintain this measure only if oil supplies from Russia continue to flow and the Sajalombatta refinery continues to operate,” a government official told Reuters, citing Agerpres.

This month, Mol temporarily cut fuel supplies to some retailers after oil shipments from Russia via the Druzhba pipeline were well below normal.

Oil supplies to Central and Eastern Europe via the Druzhba pipeline were temporarily halted this month after a Russian missile hit a power station supplying electricity to a pumping station.

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Following the increase in energy prices, the annual inflation rate in Hungary reached 21.1% in October against 20.1% in the previous month.

Economists polled by Reuters expect average inflation to rise to 15% in 2023 from the 14% expected in 2022, with price increases above the Hungarian central bank’s target of 2-4% even in 2024.

Druzhba, a mega-pipeline that transports Russian oil to Europe

Russia supplies Europe with about 3.2 million tons of crude oil per month through the Druzhba pipeline. This route is technically excluded from the EU embargo against Russian oil, as Hungary, Slovakia and the Czech Republic want to continue buying from the Russians.

But the main buyers of the pipeline – Germany and Poland – want to stop purchases from 2023, which means that about two million tons per month will have to find new buyers.

The Druzhba pipeline is one of the longest oil pipelines in the world and one of the largest pipeline networks in the world. It transports oil over a distance of about 4,000 kilometers from the eastern part of European Russia to points in Ukraine, Belarus, Poland, Hungary, the Czech Republic, Slovakia, Austria and Germany. The network also branches out into numerous pipelines to deliver oil throughout Eastern Europe and beyond.

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