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Hungary’s July 1 gas price hike 9.9%

Energy Trade

Hungary will hike gas prices to households by 9.9% as of July 1 as global energy prices have risen, the Economy Ministry said.

“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)

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