Mariana Durao and Martha Beck, Bloomberg News

RIO/BRASILIA
EnergiesNet.com 03 10 2022

 The board of directors of Brazil oil giant Petrobras is growing uneasy with the state-run company not adjusting fuel prices even as crude soars, said two people with direct knowledge of the matter. 

Board members, who are responsible for supervising the firm’s compliance with its pricing policy, are increasingly uncomfortable with political discussions involving Petrobras, the people said, asking not to be named because the talks are private. In February, the board had already asked the company’s commercialization area to explain why prices hadn’t been raised, according to the people. 

The recent surge in crude prices has added pressure on Petrobras to make fuel cheaper to help ease the blow on inflation. Investors have been jittery about possible political interference, causing shares to lag major oil peers, while the private sector says the gap between what the company charges at the refinery gate and international levels is making it economically unfeasible to import gasoline and diesel to Brazil.

Subsidies

Petrobras’s Chief Executive Officer Joaquim Silva e Luna was in Brasilia on Tuesday for meetings with the economic team, and President Jair Bolsonaro met with Economy Minister Paulo Guedes and Energy Minister Bento Albuquerque this morning to discuss the topic. 

Brazil Weighs Fuel Subsidies for Petrobras After Oil Surges 

The economic team has come around to subsidies to diesel and cooking gas, betting a mix of targeted aid and a bill currently at the Senate that changes the way ICMS taxes are charged on fuels will be enough to smooth prices, two people familiar with the matter said. While Guedes’s team doesn’t want to discuss freezing prices, they are pushing for a goodwill gesture from the company, such as taking longer to transfer costs to consumers, the people said, asking not to be named because talks are private. 

Petrobras and the Economy Ministry declined to comment. 

The state-owned company has kept prices unchanged since January, when crude was hovering near $82 a barrel, more than 30% below the commodity’s closing price on Tuesday. Oil has posted massive intraday swings in recent days as Russia’s invasion of Ukraine threatens a major global supply shock. On Wednesday, U.S crude futures tumbled below $118, falling almost $10 from an intraday high, though prices remain well above levels seen before the war. 

Hedge Funds Rush for Exit as ‘Volatility of Everything’ Surges

The board is also debating a change in the pricing policy to allow the company to consider a shorter time-frame to adjust its prices to global levels, the people said. In the onset of the Covid crisis in early 2020, Petrobras began assessing its parity with international prices on an annual basis, from quarterly before. The discussions are still in very early stage, though, and may be decided by the new board, which will be elected next month. 

Both incumbent Bolsonaro and Luiz Inacio Lula da Silva, who leads early polls for the October vote, have criticized Petrobras’s high profits and said the company needs to contribute its share, though Bolsonaro has pledged not to intervene. 

On Tuesday Amec, an association representing institutional investors with mandates of about $700 billion in the Brazilian stock market, expressed concern about a lack of transparency at Petrobras. The use of companies to serve public interests  “increases the market risk perception and jeopardizes planned investment plans,” Amec said in an open letter to the state-run giant. 

bloomberg.com 03 10 2022