FUELS PRICES CONTINUE TO PRESSURE THE GOVERNMENT

Fuels prices have been rising for more than a year in Brazil. The readjustments, which are made by Petrobras, are driven by an increasing international demand and the company’s price policy. Since road transports are prominent in the Brazilian transport matrix, the high prices provoked impacts on the economy by increasing inflation, which led to tensions on society, with protests and strike threats across the country. To respond to this crisis, President Bolsonaro asked for the change of Petrobras president for the second time. However, specialist believe that this will not affect the price policy and that fuels prices will remain high, as it was the case in the previous change of the head of the company.

A NEW PRESIDENT FOR PETROBRAS

On April 14^th, after being approved at the shareholders’ general meeting, José Mauro Ferreira Coelho was elected the new president of Petrobras. Ferreira replaced General Joaquim Silva e Luna, who was fired, on March 28^th, by President Jair Bolsonaro amid pressure due to the increase in fuels prices. Marcio Andrade Weber also assumed the presidency of the board of directors.

Ferreira is the third president of Petrobras under Bolsonaro’s government. In 2021, Joaquim Silva e Luna was appointed to the presidency of the company, replacing Roberto Castello Branco, who was also dismissed due to the President’s dissatisfaction with the state-owned company’s pricing policy.

THE RISE IN FUELS PRICES

In January 2021, Petrobras started the escalation of fuel prices in the country. Until March 2022, there were 13 readjustments, according to the National Federation of Oil Workers (FNP). Data released by the Brazilian Institute of Geography and Statistics (IBGE), on April 8^th, reveal that in the last 12 months gasoline increased by 27,48% and diesel oil, 46,47%. The biggest readjustment so far, happened on March 11^th. On that day, Petrobras raised gasoline by 18,7% and diesel S-10 by 24,9%.

The rise is mainly explained by the growing demand in the global economy after the improvement of the pandemic scenario. There is also the Petrobras’ price policy, which is based on the import parity price (IPP). In this model, fuels on the domestic market follows the variation of items such as the price of a barrel of oil abroad and the dollar exchange rate. Both reached very high levels, especially after February, when the war in Ukraine broke out.

IMPACTS ON SOCIETY PRESSURE THE GOVERNMENT

According to experts, after the March 11^th readjustment, tensions rose between General Silva e Luna and the government, who became increasingly worried with the effects on society in the middle of an election year. The increase was the last straw for the general, who was then dismissed. The spike in fuels prices in March was the biggest contributor to an inflation rate (IPCA) of 1,62% in that month. This was the highest rate registered for March since 1994 and it was also the highest monthly inflation rate since January 2003.

The high fuels prices also led to protests and strike threats. On March 29^th, app drivers and app deliverymen promoted a national protest, because tariffs would not be keeping up with the rise in fuels prices. Demonstrations happened in several cities, such as Rio de Janeiro, São Paulo and Recife. In the middle of March, groups of truck drivers also announced that a new strike could begin. However, the recent measures taken by the Federal Government, such as the release of two credit lines exclusive for truckers and a program for the purchase of trucks with more than 30 years of use by the government, may have placated the category. Besides, in March, the National Land Transport Agency (ANTT) authorized a 11% to 14% increase in the minimum reference price for freights.

WHAT NEXT?

According to financial market analysts, the change in the company’s presidency will not result in a change in price policy, and the value of fuels will probably remain high. For them, Silva e Luna’s dismissal would be a political action by President Bolsonaro to make clear to his political base in an election year his discontent with the rise in prices. Thus, they believe that things will work as they did when Roberto Castello Branco was removed from his position, a new president came in, but the price policy did not change.

Their belief is also supported by the fact that the new president is seen as a defender of the current policy. In addition, they say that the company is better protected, against political interferences, by governance and compliance rules adopted by the company.