‘Why is the concern with oil and not with wheat?’, asks former director of the ANP

Congressional and federal government proposals to smooth the rise in diesel and gasoline prices in Brazil show an oil fetish that is incomprehensible in terms of spending priorities and reflects a purely electoral concern.

The assessment is by David Zylbersztajn, professor at the Energy Institute at PUC-Rio and former director general of the National Petroleum Agency (1998-2001).

This Thursday (10), Petrobras announced a mega-increase in fuel prices, and the Senate approved proposals that change taxes and create a gasoline allowance.

He questions why there is no discussion of creating similar mechanisms to mitigate the impact of the rise in other commodities, such as soybeans and wheat, which also rose because of the conflict in Ukraine and affect more directly the people with lower incomes.

Zylbersztajn calculates that around R$ 50 billion would be needed to reduce the price of gasoline by R$ 1 and another R$ 50 billion to have the same result in diesel. The amount exceeds the BRL 89 billion allocated in 2022 to Auxílio Brasil, a replacement for Bolsa Família.

For him, the only policy that is justified, from a social point of view, is a subsidy for cooking gas, even so, focused only on low-income people.

Zylbersztajn says that the price of oil has already surpassed the US$ 100 mark on other occasions, such as in 2008, and that it is possible to live with the transfers to the price of fuel without this disorganizing the Brazilian economy.

“We have already experienced this in the past. If you take oil in 2008 and update for inflation, it comes to values ​​close to US$ 140. If you update from 2011 to 2014 it is also at a higher level. And we did not see this hysteria”, says Zylbersztajn in an interview with sheet.

For him, it makes no sense to tax extraordinary gains from oil companies at this time with new taxes. If Petrobras pays more dividends on those profits, the money should be used for health, education and other priorities, not subsidizing fossil fuels, he says.

See excerpts from the interview.

Fetish

Why is everyone so worried about oil and not about wheat, meat, soy? It’s food on people’s tables. He has an oil fetish that is incomprehensible in terms of priority.

We will privilege the low-income consumer of cooking gas. It is a social issue, of care for those who need it in order to survive. It’s an essential item. It’s relatively cheap compared to the rest and with infinitely greater social impact.

Let’s get gas at R$7. It’s the price of a train ticket in Rio. Nobody cares about the guy who’s crammed into the train. Instead of dealing with that, it is dealing with those who are alone in a car. Even in the case of diesel, more than 80% of road transport is in the hands of large carriers. These companies are able to absorb this episodic increase in diesel at this time.

What I call the oil fetish has a lot to do with electioneering, clearly. It’s 90% that, and the rest is the good faith of some ill-informed people.

​Oil used to be more expensive

It got expensive, but is it just because of the barrel of oil? This barrel was already much higher than it is today for a long time between 2011 and 2014. Our problem today is the exchange rate. People are aiming for something that isn’t exactly where to aim.

We have oil close to US$ 100 since before the invasion of Ukraine. It has a natural volatility in a situation like this. If the war is limited to Russia, we are talking about 7% of world production, which is absolutely malleable even in a relatively short term.

We have lived with even higher values ​​for a long time. If the conflict does not extend, the tendency is for the market to settle down.

dampen fluctuations

Does this exist for the rest of the economy? We are going to create a buffer for when interest rates are very high, for when the exchange rate is very high, when the price of other commodities is very high.

But all that cushioning comes from Treasury money. When you take money from the Treasury, you take it from road maintenance. The cuts in education amounted to R$ 700 million. We’re talking about giving billions to fossil fuels. It would be beautiful to take the Petrobras dividend and apply it to health and education. It does not have to be applied in the oil and gas sector.

For you to subsidize something for someone to feel in your pocket, you need a large amount. To lower the price of gasoline by R$1, it takes R$50 billion. Another R$ 50 billion for diesel. The budget for road restoration is R$ 6 billion. Even so, it was cut. If you want to reduce diesel consumption, isn’t it worth rehabilitating roads?

shortage

The exchange rate was more favorable [de 2011 a 2014], and Petrobras practiced artificial prices, almost went bankrupt, had a loss of US$ 40 billion. It was the biggest corporate debt on the planet. Today, if you drop the price below the market, there will be no imports, and Petrobras is not in a position to supply the entire derivatives market. Then you will run out of fuel.

taxation of oil companies

You have a concession agreement. Profits in relation to the productivity of the fields are already taxed. It would clearly be breaking the contract. And from what profit? What is exceptional profit? If you want to attract investment, will you break the rules of the game, will you break the contract? Concession contracts set out the rules for the taxes you pay.