The ‘hidden inflation’ of everyday products that should affect your pocket with fuel increase

The ‘hidden inflation’ of everyday products that should affect your pocket with fuel increase

The increase of 5.18% in the liter of gasoline and 14.26% in the value of diesel does not only impact vehicle owners. Important sectors of the economy should pass on the increase in fuel prices to their products in the coming months.

Prices in crucial areas for the daily life of Brazilians such as transportation, food, clothing and civil construction are expected to rise, aggravating the inflationary pressure of recent months.

The average price of gasoline sales to distributors went from R$3.86 to R$4.06 per liter. For diesel, Petrobras’ average selling price went from R$4.91 to R$5.61 per liter.

The amount charged at service stations depends on taxes and the profit margins of distributors and resellers.

The crisis at Petrobras gained a new chapter this Monday (20/6), with the announcement of the resignation of the president of Petrobras, José Mauro Coelho. The information was confirmed by the state-owned company in a statement to the market. Coelho was the third executive to command Petrobras under President Jair Bolsonaro (PL), but he left the presidency of the company and its Board of Directors after harsh criticism by Bolsonaro and the mayor, Arthur Lira, over the weekend. .

Bolsonaro even defended the creation of a CPI to investigate Petrobras directors and advisers after the new adjustment over the weekend.

“What will basically happen is that people will have a more expensive life, because it will be more expensive to travel”, says Juliana Inhaz, a professor at Insper.

Simão Silber, professor of economics at USP and researcher at Fipe (Fundação Instituto de Pesquisas Econômicas), assesses that “today, not only in Brazil, there has been a return to a phenomenon that occurred in the 1970s that became known as ‘stagflation’: a higher inflation and a lower level of production with rising costs”.

The rise in world oil is largely attributed to the War in Ukraine. Measures such as the US and EU sanctions against oil and gas exported by Russia tend to reduce the quantity of these products on the international market and increase prices. Russia is the second largest producer and exporter of oil in the world.

Petrobras imports oil and oil products and passes on adjustments due to the Import Parity Price policy, adopted in 2016.

The increase in fuels has a limited impact on the IPCA (Broad Consumer Price Index), a measure used to monitor consumer inflation trends, but has a significant influence on the IPA (Broad Producer Price Index), which registers variations in agricultural and industrial products before reaching the final point.

See below how the readjustments for the distributors can translate into increases in four sectors of the daily lives of Brazilians.

transport

The most direct effect occurs, of course, on the prices of road freight, city and interstate bus fares, plane tickets and travel in transportation apps — in addition to the amount spent by passenger car drivers to fill up their tanks.

Truck in Brazil
Truck freight values ​​should be impacted

“The values ​​will be readjusted and should come with a relatively salty readjustment. It starts there”, says Inhaz, from Insper.

Silber, from USP and Fipe, says that even if the values ​​of bus tickets, for example, are not increased by municipal regulation, the impact comes.

“We will be paying because the city will have to subsidize urban transport, put more money in this sector instead of other areas or activities”, he analyzes.

Food

“The cost of everything we consume that requires travel will also increase. We are, for example, talking about food. It will be more expensive to distribute, send the food from one place to another. Therefore, the aggregate cost of the product goes up, the cost for the product to reach the worker’s table”, says Inhaz.

“The food sector is very sensitive to these fuel price increases.”

Another indirect influence on staple products such as rice, beans and meat is due to the fact that many fertilizers and pesticides are derived from petroleum.

“This influence is already felt when planting,” says Silber. Agricultural production will have to be adjusted to these new conditions.

“Because the producer will save on the use of fertilizer. The input became more expensive and then productivity drops. All the more reason why the price will go up and harm a very large portion of the population who already face enormous food insecurity,” he says.

He also points out that storage costs, when a product needs special treatment for heat or lighting, are also impacted.

Clothing

While Juliana Inhaz points out the influence of logistics costs for moving clothing products, Silber mentions some raw materials that can impact some specific items.

“For example, nylon is petroleum. And look at the pantyhose. With the cold, the demand for the product grew, which is not produced in Brazil. The yarn is derived from oil and its production has been impacted by the War in Ukraine”, says the economist from USP and Fipe.

Construction

Building materials like bricks and sand are heavily dependent on transport and can be influenced by rising travel costs, says Silber.

He also recalls that this sector has already been pressured by the increase in interest rates by the Central Bank, a measure used to contain inflationary trends.

Source: BBC News Brazil

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