Gasoline or alcohol? What about Petrobras’ policy – 05/18/2023 – Market

Biofuel producers fear an even greater loss of competitiveness with Petrobras’ new commercial strategy, which abandoned the PPI (import parity price) and will now price fuels with an eye on the domestic market.

Biofuels had already been losing ground to petroleum derivatives with measures to try to contain fuel prices since the Jair Bolsonaro (PL) government. The concern now is that the phenomenon is accentuated with gasoline and diesel much cheaper than in the international market.

“It is always a destructive movement for biofuels”, says the president of the Superior Council of Ubrabio (Brazilian Union of Biodiesel and Biokerosene), Juan Diego Ferrés. “Oil is in a position to destroy the birth of any fuel that might replace it.”

When announcing the new commercial policy, Petrobras reduced the prices of gasoline and diesel by R$ 0.40 and R$ 0.44 per liter in its refineries, respectively, increasing the advantage of the two fuels over their renewable competitors, the ethanol and biodiesel.

Even before the cuts in refineries, which began to take effect this Wednesday (17), hydrous ethanol already lost to gasoline in almost all Brazilian states, considering that it has lower engine performance.

Last week, according to data from the ANP (National Agency of Petroleum, Gas and Biofuels), ethanol had an advantage in only two states: Mato Grosso and Amazonas. In these markets, a liter of biofuel was equivalent to less than 70% of the price of gasoline.

Fipe (Fundação Instituto de Pesquisa Econômica) considers that, with ethanol up to 75%, the choice of fuel is indifferent. In this case, are the Federal District, São Paulo and Goiás. In the rest of the country, consumers lose money if they opt for biofuel.

The scenario has been causing a drop in the participation of ethanol in the matrix of fuels for light vehicles in the country. Hydrous ethanol sales fall for the fourth year in a row: in the first quarter, they were 3.4 billion liters, 7.6% less than in the same period of the previous year and the worst number since 2017.

Even considering the increase in sales of gasoline, which includes 27% of anhydrous ethanol in its mixture, the sugarcane derivative has the worst participation in the light fuel market in Brazil since 2017: in the first quarter, it represented only 43.8% of total consumed by that segment.

Petrobras expects the average price of gasoline at the pumps to fall from the current R$5.49 to R$5.20 per liter after the full pass-through of the cut at the refineries, which should further reduce competitiveness.

“If gasoline is cheaper, the consumer will migrate to gasoline”, said consultant Pedro Shinzato, from Stone X, in a webinar promoted by the EPBR agency. “And it is a very important economic sector for Brazil, it has very large investments, it generates many jobs.”

On the other hand, the new ICMS collection model, which comes into force in early June, should put upward pressure on gasoline, since the new rate is R$ 0.20 higher than the average currently charged by the states. In July, the federal government should raise taxes on both gasoline and ethanol.

Biodiesel was also penalized by the government’s effort to contain the rise in fuel prices in recent years, with the reduction of the mandatory mixture with petroleum diesel and changes in the schedule for expanding the percentages.

Today, the mixture is at 12% and the sector fears that the high difference in prices will foment new pressures against the increase. A liter of biodiesel costs around R$ 4.50, while diesel at Petrobras refineries was reduced to R$ 3.02 per liter.

“We need to decarbonize the planet, because if not, one hour we’ll fry everyone”, says Ferrés. “This is something Europeans understand. But in Brazil, the level of irresponsibility in this regard is brutal.”