Why is the value of gasoline falling in Brazil?
The drop in the value of oil on the international scene and lower taxes with an eye on the elections help to explain the recent drop in the price at the pump.
Petrobras defined this Thursday (1st) the fourth downward adjustment in the price of gasoline since mid-June. The sales value to distributors was reduced by 7.08%, from R$3.53 to R$3.28 per liter.
In less than three months, the fuel price was reduced by 19.2% at the refineries. At the peak of the curve, the price reached R$ 4.06 on June 18.
These are the starting values of the gasoline production chain. The price still suffers incidences of profits from distributors and resellers, in addition to taxes. Only then does it arrive at the values known by consumers.
The survey of prices at the pump, carried out by the National Agency of Petroleum, Natural Gas and Biofuels (ANP), also shows a significant drop in gasoline prices.
In the same interval of 75 days, the average value of the liter sold to the consumer went from R$ 7.39 to R$ 5.25. A reduction of 29%.
The drastic drop is a mix between falling fuel prices on the international market with a tax reduction forced by the federal government in an election year. Fuels were one of the main drivers of inflation in the country within months of choosing a new president.
The price of gasoline has benefited from the drop in oil on the international scene. There is concern about a possible slowdown in world growth, which contributes to the drop in the price of the commodity.
Down since mid-June, oil futures have slipped below $100 in recent weeks. This year, they reached the level of US$ 140 with the impacts of the war in Ukraine – at the time, the great concern was that there would be a mismatch in production and supply.
The transfer from Petrobras to the distributors makes up only a part of the price of fuel for the final consumer. And with this year’s electoral dispute approaching, the Jair Bolsonaro government used tax measures to help reduce fuel prices.
At the end of June, legislation came into force that limits the rates of the Tax on the Circulation of Goods and Products (ICMS) that are levied on items considered essential – such as fuel, natural gas, electricity, communications and public transport.
ICMS is a state tax, makes up the price of most products sold in the country and is responsible for most of the taxes collected by the states.
The same law also zeroed the rates of federal taxes levied on gasoline – which, in June, represented around 10% of the price of fuel sold to consumers, according to Petrobras data.
Insper economist Juliana Inhasz says that the government tries to indirectly affect the price. “It has an influence on attempts to make Petrobras reduce the price beyond the drop in oil, such as, for example, the reduction of taxes that is not economically justified through fiscal analysis.”
How is it going forward?
The expectation is that the price of a liter of gasoline will stabilize – or even keep dropping for a while longer.
“Our perspective is that there will be no further increases in the price of gasoline this year,” he told g1 two weeks ago, the analyst at Warren Investimentos, Frederico Nobre. “It is possible that gasoline will remain at current levels or even drop a little more in the course of 2022”, he adds.
“Everything will depend on the pace of the world economy”, explained, at the same time, André Braz, economist and coordinator of price indices at the Getulio Vargas Foundation (FGV).
Braz explains that the world is still experiencing a period of high inflation, which should make the central banks of the main economies continue raising their interest rates to stop the rise in prices. This movement “cools” the economy, and hinders a rise in commodity prices – including oil.
This year’s relief, however, may be short-lived: that’s because, if there is no change, as of January, federal taxes will be levied on gasoline again – and put pressure on drivers’ pockets.
“For 2023 is another conversation. I think we have to wait a little longer for us to be able to delve deeper. There is an election there in the middle of the way that can change the ICMS measure, the whole issue of the PEC of benefits, in short, so we prefer to wait and understand”, says Nobre, from Warren.