Helio Beltrão: Pricing will bring losses to Petrobras and does not guarantee consumer benefits

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Gasoline and diesel rose more than 50% in 2021, much more than the official 8.2% inflation through October. The magic solutions gang has already named the culprits and wants price controls. As usual around here, the favorite prescription for solving social problems is a sledgehammer in the hand of a bureaucrat.

Tabulation is a zombie: a national sport in the 1980s, it was believed dead since the mid-1990s, but it is still alive in the hearts…and eating the brains of many. It is a comical coincidence that the word “zombie” entered the English language in Robert Southey’s famous book, History of Brazil.

Colonel Ciro Gomes proposed on Twitter that Petrobras should only charge the cost of production of fuels added to a reasonable profit, at its discretion, of course: the “Ciro table”. The Single Front of Oil Workers blames the increases in Petrobras’ pocketbook management. The Federal Senate wants to hear Paulo Guedes and Petrobras about the increases, and is already studying a project by a PT senator to squelch prices.

The criticisms are focused on Petrobras’ policy of monitoring international prices, roughly following the principle of the PPI, import parity price. The PPI represents respect for the market price, resulting from the law of supply and demand. Gasoline and diesel are internationally traded commodities. Roughly speaking, Petrobras’ sales price to distributors should be equivalent to the international price plus freight and logistics costs to bring the fuel into the country.

This year, gasoline and diesel rose on the international market by more than 60%, in dollars. And the real devalued. In other words, contrary to what has been said, Petrobras has not been raising prices at the same pace as the increase in international prices. According to market participants, the company has recently been charging prices below international parity.

We’ve already seen this movie. During the Dilma government, Petrobras was forced to practice prices below par to contain inflation. This decision generated direct losses of R$100 billion, not counting corruption, Pasadena and other management disasters. If the tabulation group wins the debate, the problems will be much more serious than the losses at Petrobras and the consequent lawsuits by minority shareholders (the government only owns 37% of the company).

Many people confuse the fact that Brazil is self-sufficient and an oil exporter with the fact that we are gasoline and diesel importers. Since we don’t have enough refining capacity, we need to import around 20% of our fuel.

If prices are set by Petrobras below parity, one of the two negative consequences will occur: a) there will be a lack of fuel because the importer will have no reason to buy more expensive abroad and sell cheaper here; b) the consumer price remains high, making imports viable, but Petrobras is at a loss and the consumer does not benefit.

As in the 1970s, oil has risen as a result of the Fed’s inflationary policies. Here we suffer additionally, with the BC’s policy of devaluing the real.

Repealing the law of supply and demand never worked. Since changing the president of Petrobras, Bolsonaro has not hidden his desire to set prices. “We are trying to find ways to change the law, because it is not fair for you to live in a country that pays for everything in reais. It is practically self-sufficient in oil and has the price of its fuel pegged to the dollar,” he declared in a recent live.

It is a “dilmice”, the result of which everyone knows: “I don’t think that whoever wins or whoever loses, nor whoever wins or loses, will win or lose. Everyone will lose.”

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