Petrobras slashes Brazil wholesale gasoline prices 4.9%, effective July 20

Petrobras will reduce gasoline prices at the refinery gate by 4.9%, effective July 20, in the first price adjustment under the leadership of new CEO Caio Paes de Andrade, the company said July 19.

Petrobras will cut prices to $0.7175/l, down from $0.7546/l, the company said. That was the first price reduction for gasoline since December 2021.

"This reduction accompanies the evolution of international reference prices, which have stabilized at a lower level for gasoline," the company said.

The price cut represented the first major price adjustment for Andrade, who took over June 28 amid an ongoing dispute between Petrobras and President Jair Bolsonaro, lawmakers and trade groups such as independent truckers about the company's policy of maintaining domestic diesel and gasoline prices at parity with international imports. Andrade, protege of Economy Minister Paulo Guedes, was expected to take a more government-friendly outlook toward the import-parity pricing policy.

Bolsonaro, lawmakers and trade groups have called for an end to import-parity pricing, which was first implemented in 2016 after years of government interference at Petrobras. The policy was widely lauded by investors and reaffirmed in a 2019 deal with antitrust regulators that ended Petrobras' monopoly in the refining sector and required that the company maintain domestic policies at parity with imports.

Brazil last adjusted domestic fuel prices June 18, when diesel prices were increased 14.3% and gasoline prices were boosted 5.2%. That was the first change in 39 days for diesel and 99 days for gasoline. The scathing criticism of the price hikes resulted in the resignation of then-Petrobras CEO Jose Mauro on June 20.

International crude oil and refined-product prices, however, have experienced wild swings in recent weeks amid concerns about global economic growth related to Russia's ongoing invasion of Ukraine, renewed concerns about the coronavirus pandemic and higher interest rates. That included about a 7% decline in global oil prices since the previous price hike, which opened the door for Andrade to make a move to ease inflationary pressures in Latin America's biggest economy.

Petrobras said in a separate statement July 19 that price adjustments "are made during the normal course of business and follow sales policies."

Domestic and international prices are evaluated on a daily basis, with adjustments promptly disclosed to the market, Petrobras added. The company reiterated its commitment to import-parity pricing.

"Petrobras reaffirms its commitment to practicing prices that are competitive and in equilibrium with the market, while at the same time avoiding the immediate transfer of external volatilities and foreign-exchange rates caused by temporary events," the company said.

Prices slide on tax cuts

The price cut also built on a decline in domestic fuel prices seen after lawmakers passed a series of bills in June and July that are still being implemented by states. Under the bills, the state ICMS manufacturing tax on diesel, gasoline and ethanol was capped at 17%-18%, the period to calculate the tax was extended to five years and federal taxes on diesel, gasoline and ethanol were eliminated. That resulted in about an 18% retreat in gasoline prices over the past three weeks, according to Brazil's National Petroleum Agency, or ANP.

In addition, Brazil's Congress also passed a measure that will extend a $185 subsidy for independent truckers to buy diesel and doubled benefits for needy families to buy 13-kilogram tanks of LPG used to power cooking stoves.

Many of the tax cuts and benefits, however, will expire Dec. 31.

The moves also came less than three months before Bolsonaro is expected to take on former president Luiz Inacio Lula da Silva, or Lula, in October presidential elections. Bolsonaro currently trails Lula in most early election polls.