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Demand for ethanol fuel drops sharply with higher excise tax

Demand for E85 ethanol fuel in Hungary has plummeted as a result of a HUF 70-per-liter increase in excises taxes on the fuel since last October, the daily newspaper Népszava wrote on Thursday.

President Demeter Héjj of bioethanol organization Magyar Bioetanol Szövetség told the newspaper that he expects domestic demand for ethanol fuel to drop by 60%-70% at the very least this year from previous annual demand of 36 million liters, noting that consumption of E85 fuel began to decline following the HUF 40-per-liter increase in excise tax on the fuel in October. The government increased excise tax on ethanol fuel by a further HUF 30 per liter in January. 

The newspaper wrote that the price of ethanol fuel is now between HUF 320-350 per liter at the pump, compared to around HUF 425 for petrol, less than the 30% difference needed to compensate for the HUF 40,000-HUF 50,000 required to convert vehicles to ethanol use and the 20%-25% shortfall in the fuel efficiency of ethanol fuel compared to petrol. 

Specialists told the newspaper that Hungary would be capable of producing enough ethanol fuel to meet the country's entire 1.5 million-tonne annual demand for motor-vehicle fuel, though currently produces only 10% of this amount. Most of the domestic production is exported, Népszava wrote.

Construction of 38 ethanol plants has been announced in Hungary over the past six years, but only one, 200,000-tonne capacity plant is being constructed, the newspaper noted.