How Petrobras sets gasoline prices with new policy – 06/15/2023 – Market

After the change in its fuel price policy, Petrobras began to observe a range of values ​​that evaluates, at the bottom, the cost of production and the opportunity to sell the products, at international import parity, at the top. .

Thus, the company continues to follow international quotations, but no longer targeting the value of the imported product, as the PPI (import parity price) established since its implementation in 2016.

Petrobras defends that, in addition to not passing on to the consumer costs related to importing products, the new commercial strategy gives it greater flexibility to compete for the market, both with importers and private refineries, and with competing fuels, such as ethanol.

The bottom line of the price range, which the company calls marginal cost, is defined by means of indicators that consider the refineries’ costs and production capacity, the demand for products and their competitiveness against competitors and other fuels.

This value is established by a mathematical model that the company has been using for years, but it had not been the basis for pricing at the time of the PPI.

At the top of the price range is the PPI itself, which is the reference value for the cost of imported products —the country currently imports around 10% of its gasoline consumption and a quarter of its diesel consumption.

According to this strategy, in periods of stronger demand and greater need for imports, fuel prices tend to approach the PPI. On the contrary, with lower demand or greater competition for the market, they tend to converge to the opportunity cost.

In defense of criticisms of lack of transparency, the company’s new management has claimed that private markets do not disclose their pricing formulas and that today Petrobras is no longer the sole supplier of products.

Petrobras has not established a periodicity for the readjustments and maintains the publication of single prices per delivery point (refineries, distribution bases or ports), an obligation it has with regulatory bodies in view of the high market power.

But the trend, with the new commercial strategy, is that delivery points with greater competition, such as the Southeast region, have more attractive prices. Those with less access to third-party products, such as the Midwest, tend to have higher prices.

The readjustments continue to be defined by a group formed by the company’s president, Jean Paul Prates, and by the directors responsible for the financial area, Sergio Caetano Leite, and for the product sales area, Claudio Schlosser.

Also, as in the previous model, decisions do not need to go through the board of directors, which is responsible for evaluating the policy in the longer term.