Brazil Economy minister says Petrobras’ fast fuel price updates may not be ‘best tool’

Speaking at a Senate committee hearing, he stressed that oil prices are currently at the same level as in February and that the company may have done “exaggerations” in price updates. “If today’s (Brent) price is 103 (dollars) and five months ago it was 103 as well, this fast-paced update may not be the best tool,” he said.

Since 2018, Petrobras has been setting domestic fuel prices in line with international prices. That policy has protected the company from needing to subsidize Brazilians at the pump, but has proved politically controversial. In a securities filing on late Tuesday, Petrobras said that in 2022 it made price readjustments in “a lower frequency than those seen at the pump, which are affected by the dynamics of several market players.”

The oil firm reiterated its commitment with competitive prices, adding it avoids immediately passing on to costumers price hikes caused by volatility in international oil markets and in the exchange rate. During the hearing, Guedes acknowledged that the company’s current pricing policy “undeniably” helped its recent financial recovery.

Guedes also said the government-supported spending package, which is about to be approved by the lower house, is not meant to make it cheaper for everyone to use oil when the world is facing a greener energy transition. The major pre-election package, which will cost around 40 billion reais ($7.38 billion), is about making income transfers to the poorer, said Guedes, adding that it will not impact Brazil’s 2022 fiscal result amid the recent increase seen in tax revenue.

In addition to the package, the government also reduced federal taxes on fuel and supported a bill already approved in Congress to lower state taxes. The actions have been seen by analysts as a way for President Jair Bolsonaro to boost his popularity while he trails in opinion polls for October elections amid double-digit inflation in Brazil.

($1 = 5.4172 reais)