Hike in gas prices could cost billions to Brazilian industry

Piped gas consumers in four Brazilian states may face massive hikes in their bills if court injunctions are overthrown that suspended a 50 percent increase imposed by Petrobras. The price upsurge, announced by the oil and gas giant for new contracts for the supply of inputs to state distributors at the beginning of this year, would lead to an additional cost of BRL 3.6 billion for consumers. The gas industry would be most affected, warns Abrace, the Brazilian Association of Large Industrial Energy Consumers.

In February, a decision that suspended the price hike in the state of Ceará was overturned by the president of the Superior Court of Justice, Humberto Martins. There are still injunctions of first and second instance in Rio de Janeiro, Espírito Santo, Santa Catarina, and Sergipe.

“Some industry sectors manage to pass on this additional cost, but this goes to inflation. Others still have some leeway to absorb. And there are still those who are under more pressure, who may even have their business derailed with such a strong rise,” said Adrianno Lorenzon, Abrace’s natural gas director. 

Some industry segments will be impacted more than others if injunctions are overturned, since they use gas as an input in their industrial processes. These include mining, steel, pulp and paper, petrochemicals, ceramics, and glass.  Furthermore, Rio and Espírito Santo are likely to be hit hardest, as their entire supply by Petrobras was within the scope of contracts that expired in December.

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