Oil price increases pressure for change in gasoline price policy in Brazil – 03/04/2023 – Market

The rise in oil prices after the announcement of cuts in production by exporting countries increases the pressure on the board of Petrobras, which took office last Friday (31) with one of its missions to change the company’s pricing policy.

Faced with the risk of new increases, unions and government allies reinforced the demand for changes in this policy, which is based on the concept of import parity, which simulates how much it would cost to import products.

Maintaining the current model, the market’s expectation is that the state-owned company will be forced to pass on the rise in prices at a time of pressure on prices due to the increase in state taxes. This Monday (3), the company’s shares rose on the stock exchanges, in view of the prospect of gains with more expensive oil.

According to data from Abicom (Brazilian Association of Fuel Importers), Brazilian refineries already operate with a gasoline lag since March 23, shortly after the cut promoted by Petrobras.

At the end of the trading session on Friday (3), even before the announcement of the production cut by OPEC+, the difference was R$ 0.10 per liter. For the CBIE (Centro Brasileiro de Infraestrutura), it was even higher, R$ 0.32 per liter.

On Sunday, OPEC+, a group of exporting countries that includes Saudi Arabia and Russia, announced a cut of one million barrels per day, which led the Brent price to exceed US$ 80 (R$ 405) per barrel for the first time since March 12th.

After the announcement, analysts projected that the barrel will return to close to US$ 100 (R$ 507). Goldman Sachs, for example, raised its forecast for the end of the year from US$ 90 (R$ 456) to US$ 95 (R$ 481) per barrel.

Ineep (Institute for Strategic Studies on Petroleum, Natural Gas and Biofuels) researcher Adhemar Mineiro defended this Monday that the scenario demands a review of the state-owned company’s pricing policy.

“Leaving the prices practiced in Brazil to fluctuate to the taste of international movements is to lose the protagonist role and be at the mercy of the strategy of other countries”, he stated.

Ineep is linked to the FUP (United Federation of Petroleum Workers). Two of its former researchers now occupy positions at the top of Petrobras, as advisors to the company’s president, Jean Paul Prates.

“The situation makes it even more urgent to change the price policy”, reinforced the Oil Workers Union of Espírito Santo. “Jean Paul Prates has in his hands the ideal moment to nip this evil in the bud. This must be his first action at the head of the company.”

Prates has already stated that the policy will be changed, no longer considering the import parity, but even so with some level of monitoring of international quotations. He argues that the current model favors the state-owned company’s competitors by charging their prices.

When contacted, Petrobras had not yet responded to the interview request until the publication of this text. The company usually waits to pass on moments of high price volatility and the Sheet found that the current management will maintain the strategy.

For now, the company will continue to monitor the situation, sources say.

The scenario is bad for adjustments since gasoline and diesel will be pressured by the change in the ICMS collection model, which will have higher rates than the current ones.

In the case of gasoline, the change occurs on June 1st. The new rate, R$ 1.22 per liter, is higher than that charged in almost all states, with the exception of Piauí. With regard to São Paulo, for example, it represents an increase of R$ 0.32 per liter.

In diesel, the impact is smaller, around R$ 0.13 per liter, on average, considering the values ​​practiced in the second week of March. The product, however, will also be pressured by the increase in the blend of biodiesel, which is more expensive than petroleum diesel.

The inauguration of the new board, on the other hand, begins the process of reviewing the pricing policy, which also needs to be approved by the company’s board of directors, which must be renewed at a meeting at the end of the month.