Rising oil limits Petrobras’ campaign performance and puts pressure on the board

The rise in oil prices in recent days limits Petrobras’ performance in the campaign for the reelection of President Jair Bolsonaro (PL), who, in recent weeks, had been celebrating successive price reductions by the state-owned company, publicized as government achievements.

The second round campaign starts with a lag between domestic prices and import parity — a benchmark in relation to international prices —, which makes it more difficult to justify maintaining the strategy of trickle-down cuts in gasoline and diesel prices. .

Petrobras sources say there is strong pressure from the government to at least not raise prices. To reduce resistance, the company’s president, Caio Paes de Andrade, would be negotiating the replacement of the company’s financial director, Rodrigo Araújo.

The exchange for an executive more aligned with the government guarantees a majority in the group that defines readjustments, formed by the president of the state-owned company and the financial, logistics and commercialization directors, Cláudio Mastella.

Another change desired by Paes de Andrade is in the governance board, currently occupied by Salvador Dahan, who has veto power over decisions that are harmful to the company. The board of directors, which oversees compliance with the price policy, already has a majority aligned with the government.

Sought, Petrobras said it will not comment on the matter.

According to an Ipec poll released this Wednesday (5), Bolsonaro has 43% of voting intentions in the second round, behind Luiz Inácio Lula da Silva (PT), with 51%. The institute heard 2,000 people between Monday and Wednesday.

The last cut in the price of gasoline at Petrobras refineries took place on September 1st. The diesel sales price was last cut on September 19. With no changes at refineries, the drop in pump prices has been slowing in recent weeks.

The company’s internal assessment is that there is currently no room for price reductions in the two fuels, as oil has been rising in response to the cut in production by OPEC (Organization of Petroleum Exporting Countries).

This Wednesday (5), in the late afternoon, the price of Brent, traded in London, was above US$ 93.63 per barrel. It is the highest level since mid-September.

According to Abicom (Brazilian Association of Fuel Importers), at the opening of the market this Wednesday, the price of gasoline in Brazilian refineries was R$ 0.28 per liter below import parity. Diesel, on the other hand, was R$ 0.17 per liter below the value needed to import the product.

The values ​​do not consider the high of this Wednesday’s trading session, which could widen the difference. Since the end of September, the domestic price has been lower than the foreign one, but at values ​​that would not yet justify further increases, according to experts.

Sources at the state company say that there is some room for a cut in the price of bottled gas, but other products that have been used by Petrobras to generate positive news, such as aviation kerosene and asphalt, are only readjusted once a month, that is, only will generate news close to the second round vote.

The drop in fuel prices has been used as one of the trump cards of Bolsonaro’s re-election campaign, whose image was eroded by rising inflation in the first half of the year. In the first round campaign, the president and allies visited posts in Brazil and abroad.

Paes de Andrade was appointed at Petrobras at the end of June, with the aim of giving “new dynamics” to fuel prices, according to the President of the Republic, and his work was made easier in the first months by the drop in international prices.

What candidates think about fuel prices

Luiz Inácio Lula da Silva (PT)

• Lula’s program talks about a transition to a new fuel price policy, which considers national costs and is suitable for expanding investments in refining, but without further details on how it would be done.
• “The gains from the pre-salt cannot be eroded by an internationalized and dollarized pricing policy: it is necessary to make the price of fuels Brazilian and to expand the national production of derivatives, with the expansion of the refining park”, he says.
• In their first administrations, domestic prices followed more closely the evolution of international quotations, with more spaced readjustments and some damming when oil reached historic records in 2008.

Jair Bolsonaro (PL)

• Bolsonaro’s program does not go into detail about fuel prices, but says that it is a government that preaches economic freedom and, therefore, against any price fixing.
• The text delivered to the TSE (Superior Electoral Court) says that one of the ways to lower prices is tax simplification, which “is already providing the Brazilian citizen with benefits such as the reduction of electricity and cell phone bills, the price of gasoline and access to consumer goods, such as a refrigerator”
• It also says that the improvement of regulatory frameworks and growth will generate competition and competitiveness, reducing the prices of products and services.