Good morning! Today, we take a look at why Petrobras pegs fuel prices to the dollar. The revolving door spins once more. And the latest debacle among social democrats.
What explains Petrobras’ international parity policy
As Brasília correspondent Amanda Audi explained on our website yesterday, Petrobras CEO José Mauro Coelho finds himself in the hot seat just a month after his nomination. And for the same reason that saw his predecessor lose his job: the company’s pricing policy, which since 2016 uses international oil fluctuations to set rates at refineries.
What they are saying. President Jair Bolsonaro said Petrobras must respect its “social role,” and stated that “international parity only exists in Brazil.” His center-left adversaries say similar things. Both Luiz Inácio Lula da Silva and Ciro Gomes claim Brazilian oil production is priced in reais — which would make it absurd to price sales in dollars.
- The truth, as always, is more complicated, which is why it is important to break down how the dollar affects oil production costs in Brazil.
Exploitation and production. Bank loans or oil-drilling equipment rental are calculated in dollars. Drillships are mainly built in Asia and paid for with dollar-based contracts, and inputs such...