Opinion – Vinicius Torres Freire: Petrobras has not increased its price for 50 days, even with war

Petrobras has not increased the price of gasoline and diesel for 50 days. During that time, a barrel of Brent oil was 36.8% more expensive. In reais, on a napkin account, the barrel increased by 26.4%, as the real appreciated and did not take a bigger fall even with the war.

This is not how the oil company calculates the price according to international parity (which depends on the cost of gasoline and diesel in the relevant producing markets for Brazil, etc.). But you can get an idea of ​​the problem, if the state company is really determined to maintain its pricing policy.

It is? The decision will influence inflation, perhaps the size of the interest rate hike that is yet to come and has a political effect, it is obvious. The matter becomes even more convoluted when it is noted that the prices of wheat, corn, soybeans and meats will also rise a little more also because of the war in Ukraine.

In theory, Petrobras would have a sensible argument not to change its prices for the time being, which is precisely the change caused by the war and the uncertainty about what will happen. But it has practical and political problems to deal with.

The conflict began on February 21, when Vladimir Putin announced that he would send “peace missions” to eastern Ukraine. Since Friday the 18th, the price of Brent has increased by 22.4%. So far, therefore, this is the extra cost of the war for oil, which, however, has varied greatly, even downwards, in these days of turmoil and horror. This year, Brent has already become 47% more expensive.

Petrobras can say that the timing is uncertain, but it does not seem reasonable to believe that the barrel will be cheaper anytime soon. The war will still last. If the armed conflict were to be stopped, economic sanctions against Russia would remain. Even if these retaliations do not cover energy or food business, the financial, legal and administrative limitations imposed on Russian companies and banks take some of Russian oil off the market.

There are no other signs of relief on the horizon. The United States and allies said this week they would release the sale of 60 million barrels of oil from their strategic reserves. But that’s not 10 days of Russian oil exports. It’s not a trifle, of course, but it doesn’t save the market from turmoil.

OPEC, the oil cartel, which is, by the way, Russia’s least commercial ally, maintained the policy of increasing exports by 400,000 barrels a day, every month, 12 million barrels a month, because (which is difficult to happen, as several countries are struggling to produce more, particularly in Africa).

The financial market in Brazil had a little party on Ash Wednesday of the war, as money still enters the stock market and Brazilian commodities are on the rise. What’s more, even in the US, the storm on stock markets and interest rates has been contained — the war will lead the US and EU central banks to raise their basic interest rates at a slower pace.

However, the underlying monetary and policy question remains: there is no reason to believe that inflation will drop any faster anytime soon — quite the opposite. The high price of war will directly hit the most visible and painful prices: food and fuel. The slight drop in electricity in April or May will not serve as a refreshment, unless Putin says “sorry, sorry, the war is over.” Unlikely.

In short, inflation is going to be an issue that is going to get hotter: it will hit Petrobras’ price policy, it will result in more blah blah and harmful ideas in Congress, it should affect some points of Jair Bolsonaro’s prestige.