Petrobras privatization does not guarantee lower prices, say experts

Announced as a priority by the new Minister of Mines and Energy, Adolfo Sachsida, the privatization of Petrobras is no guarantee of reducing fuel prices, according to experts. On the contrary, it may represent an increase, as indicated by the numbers of the only large private Brazilian refinery.

An impact on price would depend on the format of privatization and on more investments in refining in the country, to reduce Brazilian dependence on imported fuels and increase competition in the sale of products. Thus, any eventual effect would only occur in the long term.

The privatization proposal was announced by Sachsida shortly after his appointment to the ministry, replacing Admiral Bento Albuquerque, fired two days after an 8.87% readjustment in the price of diesel at Petrobras refineries.

Sachsida said he had the support of President Jair Bolsonaro (PL), who had already expressed his desire to privatize the company, but the market considers it unfeasible to complete the process during this term, as the operation would still depend on legislative changes.

Experts in the financial and fuel markets consulted by the Sheet they see little relationship between the privatization of Petrobras and fuel prices, which are negotiated according to the evolution of international quotations and the exchange rate.

Ativa Investimentos analyst Ilan Arbetman also recalls that the final price of the product is composed of a series of items, such as taxes and profit margins for distributors and service stations, which makes it difficult to analyze the effects of a possible privatization on the final price.

Currently, the price charged by Petrobras represents 38% of the average value of gasoline sales by Brazilian stations. In diesel, which has less taxes, the state company gets 63% of the value of each liter at the pumps.

Even with the constant increases, Petrobras has been operating with high lags, the result of a strategy to space out the announcements of readjustments after the management of Roberto Castello Branco, the first president of Petrobras under Bolsonaro, who was fired in February 2020.

“Despite the shielding, the intervention still occurs in the command of the company”, says Luiz Carlos Corrêa, partner of Nexgen Capital, remembering the changes in command motivated by the government’s dissatisfaction with the readjustments.

For the market, privatization could increase the frequency of readjustments, up or down, as shown by the first example of a privatized refinery in the country, the Mataripe Refinery, in Bahia, which operates with greater adherence to international quotations than Petrobras .

Controlled by the Arab fund Mubadala, the refinery currently sells gasoline at a value 16% higher than the average charged by Petrobras refineries, according to the Petrobras Social Observatory. Mataripe’s diesel costs, on average, 9.6% more than that sold by the state-owned company.

According to data from Abicom (Brazilian Association of Fuel Importers), the company has been operating with lag levels well below those of the state-owned company.

This Monday (16), for example, diesel in the Bahian port of Aratu is 3% more expensive than the import parity. In the national average, the product costs 5% less than the imported one. In gasoline, the lag in Bahia is 8% and, on the national average, 19%.

Considering this difference in pricing policies, the Petrobras Social Observatory estimates that gasoline would be 19% more expensive in the country if all refineries were private. Diesel would cost 12% more.

Petrobras has put up for sale eight refineries, but only Mataripe is being operated by a private company. The Manaus Refinery has not yet had the operation transferred to the new buyer, Atem. The other units did not receive proposals.

There is no market clarity on how privatization would take place: selling shares to reduce the government’s share, selling the entire company or slicing up activities to avoid a private monopoly in the oil sector.

“First, you have to know how you sell, whether you sell Petrobras as a whole or sell it by activity”, says PUC-Rio professor David Zylbersztajn, first director of the ANP (National Agency for Petroleum, Gas and Biofuels, still in the Fernando Henrique Cardoso.

He says that, regardless of the model, privatization would be a “very long process” and that competition should be encouraged by regulatory bodies. “The Petroleum Law is 25 years old and so far they haven’t done it. It’s an omission by competition defense agencies.”

“I believe that privatization can help with fuel prices, but not in the short term. Petrobras’ big problem is that it is self-sufficient in oil but not in derivatives”, adds Corrêa. “Then I would have to make an investment in a refinery to no longer need to import the finished product.”

Arbetman speaks of “more dynamic prices”, but without guarantees that they will be reduced, since their composition depends on factors not controlled by refiners, such as the price of oil and the exchange rate.