Fuel readjustment increases chance of higher inflation in 2022

The effect on inflation new adjustments for gasoline and diesel oil should not be restricted to June. According to analysts, the increases announced this Friday (17) by Petrobras will also have an impact on the IPCA (National Index of Consumer Prices) in July.

As if the impact of the readjustments alone were not enough, the attacks by President Jair Bolsonaro (PL) and allies against the state-owned company intensify the climate of tension in the market. This context can raise the exchange rate and, consequently, boost pressure on fuel and inflation, according to economists.

According to Petrobras, the average price of gasoline at refineries will be readjusted by 5.2% as of this Saturday (18), and the value of diesel by 14.3%.

The company’s policy follows the variation of oil and the exchange rate. Specialists, however, say that the readjustments have not yet been sufficient to eliminate the lag of products against international quotations.

Economist André Braz, from FGV Ibre (Brazilian Institute of Economics of Fundação Getulio Vargas), projects that the new rise in gasoline will generate an impact of 0.14 percentage point on the IPCA, distributed in the months of June and July. In the case of diesel, the estimated effect is 0.04 percentage point in the same period.

“In this month’s IPCA, only half of the increase in gasoline and half of the increase in diesel will appear. [sexta-feira] It’s the 17th, and a good part of the price collection has already been carried out”, he says.

With the readjustments, Braz raised its forecast for inflation in the accumulated this year: from 9% to 9.2%.

What can ease the pressures in the coming months, according to him, is the advance of measures by the federal government that try to contain prices.

On the eve of the elections, Congress concluded voting on a bill that establishes a ceiling for ICMS tax rates on fuel.

Next week, parliamentarians should also debate the so-called PEC on Fuels. The proposal authorizes the government to zero federal taxes on gasoline and compensate states that decide to reduce ICMS on diesel and cooking gas.

According to the calculations of economist Daniel Karp, from Banco Santander, the new gasoline adjustment should generate an impact of 0.13 percentage points on the IPCA, concentrated in the July index and also with an effect in June.

“The fuel [gasolina] has a weight of 6.8% in the official inflation indicator, and we see a risk of further increases in the short term, since different metrics point to a lag of 13% to 50% in relation to international prices”, says Karp.

“In view of the high dose of uncertainty in the scenario, due to measures that have the potential to reduce fuel prices to consumers, we are awaiting the unfolding of the processing of these projects in the National Congress, and we have not yet changed our official projection for the increase in the IPCA in 2022”, he adds.

Santander’s most recent forecast, released in early June, points to inflation of 9.5% at the end of the year.

pressure on the government

The cost of fuel became a headache for Bolsonaro on the eve of the elections. Inflation of products such as gasoline and diesel is seen by members of the president’s campaign as the main obstacle to reelection.

Sergio Vale, chief economist at the consultancy MB Associados, understands that the recent attacks by Bolsonaro and allies against Petrobras tend to generate additional pressure on the exchange rate, putting pressure again on fuel.

Thus, the effect of the proposals being discussed to lower prices would be overwhelmed by the turmoil surrounding the state-owned company. Vale also points out that government projects are a cause for concern due to possible impacts on public accounts.

For now, MB predicts IPCA of 8.7% in 2022, but the economist says there is a great chance that the estimate will soon be revised to more than 9%.

“Trying to interfere in Petrobras worsens fuel inflation. It is a scenario in which the government acts to increase, and not to decrease, inflation”, argues Vale.

At the moment, André Perfeito, chief economist at brokerage Necton, projects an increase of 8.96% for the IPCA in 2022.

However, he also recognizes that the indicator may stay above 9% until December, amidst the scenario of oil pressure and noise involving prices in Brazil.

In the 12 months through May, the IPCA accumulated a strong variation of 11.73%. Analysts still see a deceleration until December, but this movement could become more complicated given the pressure of fuels and the uncertainties related to the topic.

On Friday, Bolsonaro called Petrobras’ announcement “betrayal to the Brazilian people”. The president indicated that he is articulating with the leadership of the Chamber of Deputies the creation of a CPI (Parliamentary Commission of Inquiry) to investigate the direction of the company.

The president of the Chamber, deputy Arthur Lira (PP-AL), told the Sheet that “goes to the dick” to “review all prices” of fuel. The parliamentarian also defended the resignation of the president of Petrobras, José Mauro Ferreira Coelho, and said that he will work to tax the oil company’s profit.

Direct and indirect effects on the pocket

Fuel inflation is often felt differently by Brazilian consumers. On the one hand, those who have a car perceive the increase in gasoline directly at the pumps at gas stations.

In the case of diesel, the impact is indirect for final consumers of goods and services. This is because the fuel is used to transport goods and passengers.

That is, when it rises, it ends up putting pressure on freight costs for various products, such as food and bus tickets.

Petrobras’ pricing policy is the subject of a series of criticism from truck drivers, who have been reporting discontent with the federal government. Category leaders have repeated strike threats in recent months.