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Brazil’s Bolsonaro wants Petrobras to end global fuel parity policy -Breaking


© Reuters. An Petrobras tank truck carrying fuel is seen near the president’s plane at Brasilia Air Base, Brasilia on March 7, 2021. REUTERS/Adriano Machado


By Lisandra Paraguassu and Bernardo Caram

BRASILIA (Reuters – Brazilian President Jair Bolsonaro Monday backed efforts to lower domestic fuel prices. The Ukraine conflict has pushed oil prices up to the highest level since 2008. This added pressure to state-run Petrobras.

A government official said that Bolsonaro was looking at a program to provide fuel subsidies, but the Economy Ministry opposed it.

According to the Mines and Energy Ministry’s staff, they were meeting Monday with officials from Economy Ministry and presidential aides in an effort to address fuel price issues.

Russia’s invading of Ukraine (which Moscow refers to as a “special operations”) has caused global crude oil prices to soar, causing double-digit inflation in Latin America’s biggest economy, ahead of the October presidential election.

Bolsonaro, in a radio interview, called for an end to a policy of fuel pricing where Petrobras (which holds around 80% of Brazil’s refining capacities) aims at local parity with global price.

Petroleo Brasileiro SA shares, the official name of the company, dropped 4% during early afternoon trading in Sao Paulo. The benchmark stock index fell nearly 2%.

Brazil’s Economy Ministry did not respond to requests for comment regarding potential fuel subsidy. Petrobras did not respond to our requests immediately.

Bolsonaro referred to the Petrobras rules for setting local fuel prices on international currency and energy markets as “wrong laws” that were not valid.

He stated last week that Petrobras should reduce its profits to stop fuel prices exploding, having broken its record for both annual profit and dividend payments in 2021.


Bolsonaro’s comments add to the pressure on Petrobras. Minority shareholders had pressed for an independent hand in setting fuel price. Under previous governments, Bolsonaro’s criticism led to huge losses for the company when it was forced to buy and import fuel at discounts.

Brazil’s government appointed Rodolfo Landim (ex-Petrobras executive) to head the board of oil producers. This replaces Admiral Eduardo Bacellar Leal Ferreira. Landim told Reuters Saturday that he wanted to spend more time “with my family.”

According to two sources close to the negotiations, Petrobras had planned to apply for approval from the government this week in order to raise Brazil’s prices.

O Estado de S.Paulo, a Brazilian newspaper, reported Monday that Petrobras was considering subsidies. It also stated that it could announce this week a compensation plan for Petrobras’s low wholesale prices.

Unnamed participants to discussions on the plan design were cited by the newspaper. They reported that Petrobras might pay dividends to finance the subsidies.

Economy Ministry also opposed proposals to subsidize fuel prices by using state funds. This is because it sees very little value in any program that might threaten key fiscal regulations.

The price of a barrel briefly topped $139.13, while the U.S. West Texas Intermediate rose to $130.50 Monday. This was the highest benchmark level since July 2008. It happened because the United States, Europe and its allies were considering a ban on Russian oil imports, and the prospects for Iranian crude returning to the global markets dimmed.