Petrobras changes course under Lula
Nothing that has happened in this tumultuous week for the Brazilian oil giant Petrobras comes as a surprise. Instead, it has crystallized a very clear position of the Luiz Inácio Lula da Silva government: taking the state-controlled company back to its role of absolute protagonist in the oil sector.
However, the side effects of such course changes are already becoming apparent. The pro-environment coalition that helped Lula win his third term is starting to crack.
State of play. Last week, Petrobras changed its fuel pricing policy, replacing international import parity with a “commercial strategy” that prioritizes the “customers’ alternative cost” and the company’s “marginal value” in each negotiation.
- This means that the company, which controls 84 percent of the country’s refining capacity, is willing to drown the already hungry competition and sacrifice regional and short-term margins in order to win new customers and grow in the long run. In business parlance, the company will use opportunity cost logic for pricing.
Yes, but … To reassure the public, Petrobras has insisted on the message that it will avoid transferring international volatility to the domestic market. In practice, downward adjustments will continue to occur more quickly than upward ones — as happened just hours after the company announced its new pricing policy. Gasoline and diesel prices are now below international parity.
Fuel, fuel, fuel. The new pricing policy is part of a broader plan by Lula’s appointee, chief executive Jean Paul Prates, and the company’s new board of directors. They want to change the company’s strategic plan and stop its divestment in refineries — triggered by an agreement signed in 2019...
Search
