Hungarian household natural gas prices should be raised sharply, by double digits from January, due to rising import costs, Laszlo Varro chief economist of the Hungarian Energy Office said on Thursday.
Varro said an independent study that calculated there was a need for 18 to 20 percent increase was accurate.
"The figures are more or less accurate...given that we do not anticipate any significant fall in oil prices," Varro said.
Varro was responding to a study released by economic think tank GKI which said assuming oil prices around $40 per barrel and an exchange rate of 200 forints to the dollar the government must raise gas prices by between 18 and 20 percent from January.
"Their base assumptions are similar to ours...we have more and less pessimistic scenarios and this is somewhere in the middle," Varro said.
Hungarian gas prices, in the forefront of the domestic political debate, are set by the government after weighing the Energy Office's opinion.
The government may increase the price twice a year, including on January 1.
A gas price hike would be positive for oil and gas firm MOL, the nation's biggest gas wholesaler, which has suffered major losses in the past on the government's past policy of keeping retail prices under international purchase costs.
But Varro warned there was a significant upside risk to GKI's forecast due to the forint's exchange rate.
"Because the forint is strong, the situation is only bad and not catastrophic. If the forint weakens, let's say to 270, (against the euro) that would warrant another 6 percent to 7 percent increase."
The forint has been trading around 245 to the euro this week but most economists expect it to weaken over the coming months as the government appears determined to push it weaker.
As gas prices follow oil prices with a six to nine month lag, high oil prices ensure that gas import costs will rise sharply in the first half of 2005.
"What was our pessimistic scenario in July has become our optimistic scenario by now," Varro added.
Source: Reuters
03.12.2004