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Petrobras announces new reduction in gasoline and diesel prices

Petrobras reduction gasoline diesel prices
Illustration: Shutterstock/EPA

Brazilian oil and gas giant Petrobras announced that it would reduce its gasoline and diesel sales prices to distributors as of Wednesday. While gasoline will see a price reduction of 6.1 percent, the price of diesel will fall by 8.18 percent.

As usual, the company pointed out that “these reductions accompany the evolution of reference prices and are consistent with Petrobras’ pricing practice, which seeks to balance its prices with the market, but without passing on to internal prices momentary volatility of quotations and the exchange rate.”

The readjustments align with the gaps perceived between international prices and the company’s rates. Per calculations by the fuel importers association Abicom, there was an average positive difference of 8 percent in diesel and gasoline prices sold in Brazil compared to abroad.

The last time Petrobras reduced its fuel rates was on September 2 for gasoline and September 20 for diesel. Since the end of June, the state-controlled company had taken advantage of the drop in international prices and made four consecutive price cuts to gasoline and another three to diesel. It had also made consecutive reductions in rates on oil derivatives adjusted monthly, including aviation kerosene. 

In October and most of November, however, oil rates in the international market rose again due to the announcement of the OPEC energy cartel’s first large production cut in over two years. Domestic prices even stayed below international rates for more than two weeks at the end of October, the amount of time it usually takes for Petrobras to readjust its prices. 

“Petrobras spent 95 days without readjusting the price of gasoline and 77 days without readjusting diesel oil, these lags were very negative for a very long period, from the end of September until a few days ago, and Petrobras did not react. Now that international prices are dropping, Petrobras is reacting very quickly. Reaction times are different,” Abicom CEO Sérgio Araújo told Reuters.

When prices passed the two-week out-of-date mark, The Brazilian Report pointed out that Petrobras was unlikely to increase them as the second round of the presidential elections was just around the corner. 

Now, less than a month before President-elect Luiz Inácio Lula da Silva begins his term, Petrobras is bleeding market value as markets worry about how the incoming government will run the state-controlled company, with ever-growing fears as to the probable end of the company’s pricing policy.