Petrobras indicates that diesel price will continue to rise, two days after government package
- June 10, 2022
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In Petrobras’ assessment, the current world scenario is one of scarcity and, as Brazil has a deficit in diesel oil production, the result will be an impact on prices and supply.
Pressured by the government to change its pricing policya Petrobras signaled this Wednesday, 8th, that the fuel cost – mainly diesel – follows an upward trend and will continue to do so. This indicates that the measures announced by the president Jair Bolsonaro on Monday to contain the price of fuel, such as exemption from federal taxes and payment of ICMS reset by States, should not have the expected effect.
In a note sent to the press with “clarification by Petrobras on the practice of market prices”, the oil company states that “there are no fundamentals that indicate the improvement of the global balance and the structural retreat of the international quotations of reference for diesel oil”.
In Petrobras’ assessment, the current world scenario is one of scarcity and, as Brazil has a deficit in diesel oil production, having imported almost 30% of the total demand in 2021, the result is this: “there may be a greater impact on prices and supply”.
The state-owned company also claims that this scenario has become even more likely because national diesel consumption is historically higher in the second half of the year, due to the increase in agricultural and industrial activities. “It is also noteworthy that the domestic market recorded a record consumption of diesel oil last year and this mark should be surpassed in 2022”, declared the company.
The Petrobras statement comes as the government seeks to replace current president José Mauro Coelho, who took over the command of the state-owned company in April, with Caio Paes de Andrade, the current special secretary for the reduction of bureaucracy at the Ministry of Economy. The nomination must go through an extraordinary general meeting of shareholders, which has not yet been scheduled. Since the beginning of the government, Bolsonaro has already fired three presidents of Petrobras.
According to Petrobras, outside Brazil, there are still a number of factors that should drive fuel prices: the seasonal increase in world demand in the second half of the year; the lower availability of Russian exports due to economic sanctions on the country; and eventual unavailability of refineries in the United States and the Caribbean, with the hurricane season that takes place from June to November.
“Given this scenario, it is essential that the practice of competitive prices and in balance with the global market be a reference for the Brazilian fuel market, aiming at national energy security”, says the company.
The scenario detailed by the company indicates that Petrobras is not willing to change its pricing policy linked to the national market, with values in line with those practiced around the world.
“Like any other commodity traded in an open economy, fuel pricing in Brazil is determined by the balance of global supply and demand, since products of this nature have homogeneous physical characteristics and are produced, transported and marketed on a large scale throughout the world. world, having multiple suppliers and demanders”, declared the company.
To change these rules, the government would not only have to rely on the approval of the company’s board, change the state-owned company and change the legislation itself. Since January 2002, the free pricing regime has been in effect in Brazil by law in all segments of the fuel and oil derivatives market: production, distribution and resale.
“It is up to each economic agent to establish their sales margins and sales prices, in a scenario of free competition. Petrobras does not operate in the distribution and resale segment, being responsible only for the production of fuels,” said the company.
In defending the model, which has been frequently criticized by President Jair Bolsonaro and by truck drivers, who demand a change in the regime, icms “prices aligned with market value stimulate production and competition in the present, as well as fostering investments that will contribute for the expansion of the volume produced, for the achievement of the quality required for the products, and for the increase of the logistic capacity, with direct benefits to the consumer”.
According to the company, “below market prices make the imports necessary to complement the national supply economically unfeasible. Recent examples of misalignment with market prices already translate into supply problems in countries neighboring Brazil.”
Petrobras denies that it has a monopoly in the sector and says that “without the practice of market prices, there is no incentive for the various agents in the sector to serve the Brazilian market”. According to the company, if the national market fails to follow international prices, there would be a risk of shortages, because this would affect the business done by other companies in the sector.