How to lower fuel prices in Brazil

I write this column with a hint of pretentiousness. In this real confusion about the price of fuel, in which President Bolsonaro is aiming for the tax part (see here the text by Heleno Torres it’s mine, among many), the problem lies elsewhere. The president is with weak aim. The intention of the text is to show possible ways to solve the issue.

An alternative is pointed out by President Bolsonaro, who, if re-elected, has already declared that he will privatize Petrobras.. It is an alternative to be discussed, although it does not seem to me that it will reduce the price of fuels, as there is an ever-present risk of creating a private monopoly, without the government being able to have any interference in the sector. It is a good way to transfer the problem, removing it from the agenda of government concerns, without solving it.

Another alternative is opposite to the previous one and involves a political decision strategic of Petrobras’ controlling shareholder — that is, the federal government. Considering that oil and, consequently, all the fuels derived from it, are strategic for the Brazilian economy, whose prices cannot vary according to international crises, such as wars or exchange rate problems, the alternative would be Petrobras close your capital (Article 4, §4 of the Corporation Law), becoming a mixed capital corporation closed. Of course, at first this will impact the company’s coffers, as a valuable and irrefutable offer for the shares will have to be made.

Thus, Petrobras would become a joint stock company, of mixed economy, closed, with different classes of shares (Article 16, Corporate Law). This would minimize the impact of private shareholders on the company’s decisions, and, consequently, on the pricing policy. will not eliminate its influence, as private capital will remain in the company and the pursuit of high and immediate profits will remain. Does Petrobras need to offer shares on the New York Stock Exchange, considering it is a capitalized company with huge reserves to be explored? The same question applies to the Brazilian Stock Exchange.

Following this alternative strategicthere is still a more radical normative possibility, which admits the expropriation of private shares (Article 236, sole paragraph, Corporate Law), which would place Petrobras’ corporate control fully in the hands of the State (with expenditure from the National Treasury). In this case, there would no longer be a mixed capital company, given the lack of private capital in the company, which could operate in compliance with the legal regime for public companies (Article 5, II, Decree-law 200/67). Obviously, all the rules of transparency and public and social control would apply to it (Law 13,303/16), as well as the scope of “meeting the public interest that justified its creation” (Article 238, Corporate Law), obeying the “relevant collective interest” (article 173, CF). Thus, Petrobras could develop a dividend distribution policy “in light of the public interest that justified its creation” (art. 8, V, Law 13,303/16).

Adopting this hypothesis, Petrobras’ strategic investment plan should be heavily focused on the construction of new refineries, as the bottleneck in prices is at this point. After all, we are in surplus extraction of oil, but not in its refining. So we have Petroleum in abundance, but we do not have fuels in abundance. In this aspect, the final product (fuels) is scarce and we need to import it, making the price necessarily compatible with the international market. If we produce more fuel from our oil, we can have more adequate prices, as it is a product strategic for the Brazilian economy – just as gas is strategic in Europe, which was heavily affected by the war in Ukraine, with the difference that only Russia has gas in abundance.

The current idea of ​​a divestment plan is ridiculous, as it joyfully exposed at the end of 2020 the idea of ​​reducing the company’s 13 refineries to just five units, meaning that “production capacity will go from 2.2 million to 1.1 million barrels per day”.

In the case analyzed here, Petrobras will certainly have to be profitable, but the price of its products will no longer follow international parameters, starting to adopt its investment plan, which should be strongly anchored in the construction of refineries. It is known that oil is a fossil fuel, exhaustible, whose importance will decrease in the coming decades with the advancement of electric cars. The pricing policy, therefore, must pursue balance sheet active balancesand not profit speculative — which is also different from profit arbitrary or abusive (For this distinction, see my Essay on the legal content of the principle of profitability. Administrative Law Journal. Rio de Janeiro: Renew, v. 224, p. 323-347, 2001). If you need money for your investments, you can issue debentures, not convertible into shares (Article 11, I, Law 13,303/16), never becoming a state-owned company. dependent (Article 2, III, Fiscal Responsibility Law).

Note that Petrobras has its days counted as an oil company, as the oil civilization tends to decline and end in the coming decades. Just see the modification of the business plan of the other related companies, which are migrating to the production of sustainable energy.

This is neither an electoral nor a short-term solution, and must be analyzed seriously, in order to allow the Brazilian population to effectively enjoy its enormous oil reserves while they still have economic relevance, with transparency and adequate regulation, in order to allow fair prices to be charged and free from the impact of international crises.