‘We cannot deviate from market prices’, says Petrobras president

After new complaints from President Jair Bolsonaro (PL) about the high profits of Petrobras, the president of the state-owned company, José Mauro Coelho, returned to defend this Friday (6th) the company’s fuel price policy.

“We cannot deviate from the practice of market prices, a necessary condition for the generation of wealth not only for the company but for the entire Brazilian society, fundamental to attract investments to the country and to guarantee the supply of derivatives that Brazil needs to import. “, he said.

The statement was given in an opening speech on a conference call with analysts to detail the profit of R$44.5 billion in the first quarter of 2022, which led to the announcement of the distribution of R$48.5 billion in dividends to shareholders.

Shortly before the result was released this Thursday (5), Bolsonaro said in his weekly live that Petrobras’ high profits are a “rape” and that a new adjustment in fuel prices could break the country.

“We appeal to Petrobras: ‘do not readjust the price of fuel’. You are making an absurd profit. If you continue to make a profit this way and increase the price of fuel, Brazil will break”, said the president.

The state-owned company’s high profits are the target of criticism from both the government and the opposition, given the rise in fuel prices in the country. Public transport companies, in turn, issued a note threatening to take buses out of circulation during off-peak hours in the event of a new rise in diesel prices.

Petrobras, on the other hand, is also a target of the fuel sector, which complains about the lack of readjustments and the consequent lag in relation to international prices. This scenario would be causing a “selective rationing”, by harming smaller companies, unable to import.

Concern about supply is one of the arguments that Coelho has repeated in defense of the price policy, since he still held a position at the MME (Ministry of Mines and Energy). This Friday, he recalled that Brazil depends on imported diesel and gasoline.

The director of Institutional Relations and Sustainability at the state-owned company, Rafael Chaves, added that market prices are “a democratic way” of signaling to buyers and suppliers the conditions of supply, whether it is necessary to increase supply or reduce consumption, for example.

“The alternative to the market price is the price list. We have seen this in the past in Brazil and many neighbors try too, and it doesn’t work,” he said.

The financial market expects new readjustments soon, mainly in the price of diesel, which has become detached from international oil prices.

This Friday (6), according to Abicom (Brazilian Association of Fuel Importers), the average price of fuel in Brazilian refineries is R$ 1.27 per liter below import parity, a concept used by Petrobras in its pricing policy.

“We hope that Petrobras will adjust prices upwards to guarantee the supply of fuel in Brazil”, wrote, in a report released this Friday, analysts Luiz Carvalho, Matheus Enfeldt and Tasso Vasconcellos, from UBS BB.

Coelho was appointed by the government to replace General Joaquim Silva e Luna, who was fired after the mega-price increases announced in March to accompany the escalation of oil after the start of the War in Ukraine.

But as soon as he took office, he defended the practice of international prices. This Friday, he said that the result of the first quarter is “unequivocal proof that Petrobras is a company that all our shareholders and Brazilians can be proud of.”

The performance benefited from the appreciation of oil, higher exports and better margins in the sale of diesel. It is 3,718% higher than the BRL 1.1 billion recorded in the same period in 2021, still under the strong effect of the drop in prices and demand caused by the pandemic.

It comes right after the biggest annual profit in Petrobras’ history, of R$ 106.6 billion, which led the company to distribute R$ 101.4 billion in dividends.

Despite the president’s own criticism, the company’s management this Friday reinforced its dividend policy, which provides for the distribution of 60% of the difference between cash generation and investment spending forecast.

“We will always seek to distribute as much as possible of what we generate of value”, said Araújo to market analysts, who praised the company’s performance in the conference call and in reports released this Friday.