Petrobras Faces Pressure for Fuel Price Adjustments Amidst High Dollar
As the new year unfolds, Petrobras finds itself under significant pressure to adjust fuel prices due to the rising value of the dollar. Since October 2024, the dollar has surged nearly 15%, exacerbating the gap between domestic fuel prices in Brazil and international rates.
According to data released by the Brazilian Association of Fuel Importers (Abicom) in collaboration with StoneX Brasil, the average price discrepancy currently stands at 16% for diesel fuel and 12% for gasoline. This indicates that consumers in Brazil are paying less compared to global prices.
The increase in the dollar's value directly impacts the price of oil, which is traded in U.S. currency. Consequently, as the dollar appreciates, the cost of crude oil becomes more expensive when converted to Brazilian reais. Additionally, the price of Brent crude, a global benchmark for oil, rose approximately 8% over the past month, currently priced at $76.93 per barrel.
The combination of these factors has widened the already existing gap in fuel pricing in Brazil. The last price adjustment by Petrobras occurred in July 2024, marking the only change under the leadership of President Magda Chambriard.
In response to inquiries regarding potential price hikes in light of the rising dollar and Brent prices, Petrobras has yet to provide a definitive statement.
Since the beginning of President Lula's administration, Petrobras has moved away from the international price parity (PPI) model, which had been in place since 2016. This previous framework linked the prices of fuels sold by the company to international market fluctuations. The current administration refers to its new pricing strategy as an attempt to 'Brazilianize' fuel prices.
Under the revised pricing policy, Petrobras claims it no longer aligns its local prices with international rates as a strict reference point. This means that while high external oil prices will still affect domestic pricing, the adjustments may occur more gradually. The aim is to reduce volatility stemming from global market fluctuations.
A central argument for this new approach is Brazil's self-sufficiency in oil production, suggesting that the country should not be overly influenced by international price swings, particularly in relation to currency fluctuations. However, importers have expressed concerns that this strategy undermines their competitiveness.
