Petrobras announces drops in fuel prices on the eve of the election

Survey carried out by the OSP (Observatório Social do Petróleo) at the request of the Sheet shows that Petrobras adopted different fuel pricing strategies in times of high and low international oil prices in 2022.

When oil rose, the company carried out fewer readjustments and practiced prices below international quotations, keeping the transfer to the pumps. With oil falling, he began to announce frequent reductions and follow the foreign market more closely.

For Eric Gil Dantas, economist at the OSP and the Brazilian Institute of Political and Social Studies, the data indicate that the execution of Petrobras’ pricing policy was subject to political pressure during the election year.

“Petrobras’ pricing policy follows the PPI [Preço de Paridade de Importação]”But there is another variable, which is political pressure”, says Dantas. “Until June, Petrobras had to keep prices below the PPI. But when July arrives, it starts to practice prices equal to or even higher.”

Petrobras says readjustments have no defined frequency

Petrobras stated in a note that there is no defined frequency for the diesel and gasoline readjustments. “The company continues to seek to balance its prices with the market, but without passing on to domestic prices the conjunctural volatility of international quotations and the exchange rate.”

The company also said that there is no single reference for comparing prices in the international market that is perceived by all agents. “For demonstration, it is enough to observe that two renowned information agencies, Argus and Platts, publish price references for Brazil with significant differences between them”, he informed.

War in Ukraine put pressure on oil prices

In the first half, while oil prices soared in response to the Ukrainian War, Petrobras promoted three increases in the price of gasoline. As of July, when oil began to retreat with the risk of a global recession, there have already been four cuts.

With diesel, the strategy was similar, although with less room for declines, as the product has been pressured by the European market’s need for alternatives to Russian natural gas: there were four increases in the first half and two cuts in August alone.

In the market, the assessment is that the company has been promoting drop-per-adjustments, lowering prices with greater frequency and less intensity to generate positive facts for the campaign for the reelection of President Jair Bolsonaro (PL).

After Caio Paes de Andrade became president of the state-owned company, the company began to announce almost weekly price cuts. It even started to publicize adjustments to products that were not officially publicized before, such as aviation kerosene and asphalt.

Between July 19 and September 1, there were nine ads, which are used by the president and his supporters in the campaign and on social networks. Its effects on inflation are also celebrated by the government as signs of improvement in the Brazilian economy.

The opposition, on the other hand, mocks the strategy by saying that the cuts are announced after the release of polls that show PT candidate Luiz Inácio Lula da Silva ahead in the presidential race.

This Friday (9), for example, the IBGE (Brazilian Institute of Geography and Statistics) reported that the IPCA had the second consecutive deflation, closing August at -0.36%.

The performance was mainly influenced by the drop in the transport group, which dropped 3.37% in the month, contributing -0.72 percentage points to the index. That is, it more than offset the increase in seven other groups surveyed, mainly health, clothing and food.

The downward movement in fuel prices, especially gasoline, began with the passage, by Congress, of a law that reduced federal and state taxes. It has accentuated in recent weeks, with the fall in international oil prices.

Sources at Petrobras say the strategy called for weekly announcements of price cuts until the first round of the election, the first weekend in October, but there were no announcements this week, although market estimates indicate scope for a drop in gasoline.

According to Abicom (Brazilian Association of Fuel Importers), the average price of gasoline in Brazilian refineries was R$ 0.36 per liter more expensive than the import parity at the opening of the market this Friday.

The association’s data show that the average price in the country has not been below the international price since July 27, even though Petrobras has made three cuts in the amount charged by its refineries in this period.