Ukraine’s halt of Druzhba pipeline may trigger sharp gasoline price hike in Hungary
Head of the Prime Minister’s Office Gergely Gulyas stressed that the pipeline is ready for operation and that Kiev is blocking the transit of Russian crude solely for political reasons
BUDAPEST, February 26. /TASS/. The Hungarian government is demanding that Ukraine resume supplies of Russian oil via the Druzhba pipeline, as its full shutdown could lead to a significant rise in gasoline prices, Head of the Prime Minister’s Office Gergely Gulyas said. He stressed that the pipeline is ready for operation and that Kiev is blocking the transit of Russian crude solely for political reasons.
"If Ukraine permanently closes the Druzhba oil pipeline, this will lead to a sharp increase in gasoline prices," Gulyas said at a press briefing. He explained that a barrel of Brent crude currently trades $13 higher on the global market than a barrel of Russia’s Urals blend, and taking into account transportation costs, Hungary’s MOL would have to pay up to $20 more per barrel for European oil.
The head of the Prime Minister’s Office recalled that MOL’s refineries in the Hungarian city of Szazhalombatta and in the Slovak capital Bratislava are technologically configured to process Russian crude oil. Russian oil still accounts for more than 50% of the supply balance there. Several years ago, the company began modernizing its facilities to reduce dependence on Russian supplies, but the costly process has not yet been completed.
Gulyas also noted that the suspension of Russian transit via the Druzhba pipeline would put pressure on the markets of Eastern and Central Europe, where a supply shortfall and price increases could follow. Replacing the missing volumes would be difficult. "Gasoline prices could rise to levels we have never seen in Hungary," he warned.
According to Hungary, oil has not been delivered via the Druzhba pipeline since January 27. On February 15, Hungary and Slovakia asked Croatia to allow the transit of Russian crude through the Adriatic pipeline, with deliveries expected to arrive by sea at the Croatian port of Omisalj. The Hungarian government has also decided to provide MOL with 250,000 tons of oil from state strategic reserves for its refineries. These reserves are sufficient for three months.