Diesel price subsidies for road hauliers would be a mistake – the Clean Air Action Group wrote a letter to ministers

Clean Air Action Group addressed a letter to István Kapitány, Minister of Economy and Energy, and Dávid Vitézy, Minister of Transport and Investments, asking them not to give in to the pressure of freight transport interest groups and not to provide public support to the sector due to rising fuel prices. The NGO draws attention to the fact that the measure would increase the risk of a diesel shortage in Hungary, divert resources from other areas of the economy, and artificially depressed prices would cause serious damage to the road transporters themselves in the long run.

The subsidy for road transport could only improve the situation of road transporters for a short transitional period at most, but it would have negative effects on the country even in the short term and on hauliers in the medium term. The Clean Air Action Group drew attention to these aspects in its letter sent to Ministers István Kapitány and Dávid Vitézy in connection with the fact that several road freight transport interest groups are demanding support for road hauliers due to the increase in the price of diesel oil.

Subsidizing hauliers would also be a mistaken step because it would increase the demand for diesel oil, while this demand should be significantly reduced. If the latter is not done, the risk of a shortage of diesel in Hungary will increase significantly, which cannot be in the interest of the hauliers either.

It would also be perverse to support the hauliers with public funds because truck operators do not pay a large part of the costs caused by their activities. According to a 2019 study on the European Commission's website, road hauliers in Hungary pay only a third of the costs they cause to society (including the costs of environmental and health damage). An earlier study by the Hungarian Institute of Transport Sciences came to a similar conclusion.

András Lukács, president of the Clean Air Action Group, stated: “The hauliers’ organizations pretend not to know that the government could only give them subsidies if it took money from elsewhere or if it gave less subsidies to other areas. However, there is nothing to support that subsidizing road carriers is an efficient way to use public funds; the facts show just the opposite. Excessive subsidies for road freight transport divert resources from areas that would contribute much more effectively to the development of our economy.”

The complaint of road hauliers is also disingenuous because in the past 25 years, the performance of the sector in Hungary has almost tripled in terms of tonnes-kilometres. In addition, measured in tonnes, it has increased by only 30 percent during the same period, which means that not much more goods are being transported further and further away, which even more questions the meaning of the subsidy.

It may be that due to the increase in the price of diesel, some jobs will be lost, but on the one hand, this is inherent in the market economy, and on the other hand, social problems are not to be solved by subsidizing the price of diesel. The picture is further nuanced by the fact that there is currently a shortage of 8,000 drivers in the transport sector.

Although hauliers are right that the increase in the price of diesel contributes to inflation, this contribution will be very limited, as the share of the fuel price in the price of a product is usually only 3 percent. On the other hand, keeping the price of diesel artificially low causes market distortion and economic disruption, which may increase inflation much more in the long run.

If there is a permanent overdemand for a product or service due to incorrect pricing, it will sooner or later lead to collapse. It is also in the interest of the hauliers that this does not happen. Thus, it would be in their interest to have higher excise duty on diesel and thus reduce the demand for diesel.