Hungary’s July 1 gas price hike 9.9%

“The change is justified by continuously rising crude prices in the international market,” it said on its www.gkm.hu homepage. The hike is slightly above the 9.4% reported by the economic daily Napi Gazdaság earlier on Friday. Napi said the hike was below a 12.5% proposal by the Hungarian Energy Office (MEH) based on an increase in the price of natural gas on the international market, the second quarterly adjustment in a row, in which prices rise less than costs.

In April the government increased gas prices to households by 5.8%, half the size of the hike proposed by MEH, in an effort to keep down the cost of energy for households at a time when inflation has remained high.

Household energy, including gas and electricity, is 20% of Hungary’s inflation basket and price rises have remained stubbornly high. They were up 6.6% on an annualized basis in April. Gas prices are also a sensitive political issue for the Socialist government which has seen its support fall to around 15% in opinion polls after tax and price increases in the past two years which helped cut the soaring budget deficit.

The main opposition party Fidesz, which stands at around 40% in polls, has often criticized the government for not keeping gas price hikes low enough. Analysts have said keeping gas consumer price rises below cost increases will likely mean a bigger increase, when the government frees up the gas market next year.

The paper said in a separate article that parliament was unlikely to approve the gas liberalization law before the summer break, and that could cause a 6-12 month delay in the market liberalization which has been planned for Jan 1, 2009. (Reuters)