Petrobras defends its pricing policy in line with the foreign market and says that this avoids shortages | Economy

Petrobras reaffirmed this Wednesday (8) that the practice of fuel prices aligned with the foreign market is necessary to maintain energy security and avoid shortages, amid strong pressure from the Bolsonaro government for changes.

The company said that there is a possibility that the global market for diesel oil will be more pressured in the coming months and, in a scenario of world shortages, the national supply “requires special attention”.

“The practice of competitive prices and in balance with the market is a necessary condition for the country to continue to be supplied without risk of shortages by the various agents,” said the company, indicating that fuel prices may rise again at refineries.

Petrobras has, however, held back the readjustments in the prices of diesel and gasoline, avoiding automatically passing on the variations of the international market and the exchange rate. Diesel, which serves as fuel for trucks that transport cargo across the country, with a direct impact on inflation, has not increased since May 10, and gasoline has not increased in price for almost 90 days.

In its statement, the state-owned company assessed that the market will face a seasonal increase in world demand in the second half of the year, lower availability of Russian exports due to the worsening of economic sanctions on the country, in addition to the possible unavailability of refineries in the United States and the Caribbean with the hurricane season from June to November.

“Therefore, there are no fundamentals that indicate the improvement of the global balance and the structural retreat of the international quotations of reference for diesel oil”, added Petrobras.

As Brazil has a deficit in diesel oil, having imported almost 30% of demand in 2021, the company believes that there could be a greater impact on prices and supply.

In addition, national diesel consumption is historically higher in the second half of the year due to the seasonality of agricultural and industrial activities. The domestic market recorded a record consumption of diesel oil last year and this mark is expected to be surpassed in 2022.

With this, Petrobras said that it adopts a dynamic that provides a balance with the market, avoiding the immediate transfer of the volatility of international quotations and the exchange rate caused by conjunctural issues to domestic prices.

“(But) prices below the market make the imports necessary to complement the national supply economically unfeasible.”

Earlier, President Jair Bolsonaro said that the federal government does not intend to interfere in Petrobras’ pricing policy, but complained about the company’s high profitability and stressed that the company lacks an understanding of the current moment of the global economy.

He pointed out during which major oil companies lowered their profit margin in the world and “here the opposite is done”.

Petrobras warns government about diesel shortages

Check out the full statement from Petrobras:

Petrobras reiterates its commitment to the practice of competitive prices and in balance with the global market, necessary to guarantee domestic supply.

As with any other commodity traded in an open economy, fuel pricing in Brazil is determined by the balance of global supply and demand, since products of this nature have homogeneous physical characteristics and are produced, transported and traded on a large scale throughout the world. , having multiple suppliers and demanders.

In accordance with Law No. 9,478/1997, amended by Law No. 9,990/2000, since January 1, 2002, a free pricing regime has been in effect in Brazil in all segments of the fuel and oil derivatives market: production, distribution and resale. Thus, it is up to each economic agent to establish their sales margins and sales prices, in a scenario of free competition. Petrobras does not operate in the distribution and resale segment, being responsible only for the production of fuels.

Prices in line with market value stimulate production and competition in the present, as well as encourage investments that will contribute to the expansion of the volume produced, to reach the quality required for the products, and to increase the logistics capacity, with direct benefits to the consumer. On the other hand, prices below the market make the imports necessary to complement the national supply economically unfeasible. Recent examples of misalignment with market prices already translate into supply problems in countries neighboring Brazil.

Petrobras adopts a dynamic that provides a balance with the market, while avoiding the immediate transfer of the volatility of international quotations and the exchange rate caused by conjunctural issues to domestic prices.

Petrobras is not the only fuel supplier in Brazil. There is no monopoly. Without the practice of market prices, there is no incentive to serve the Brazilian market by the various agents in the sector.

In this way, the practice of competitive prices and in balance with the market is a necessary condition for the country to continue to be supplied without the risk of shortages by the various agents.

At this point, it is important to point out that the global energy market is currently in a challenging situation. With the acceleration of the world economic recovery from the second half of 2021 and, notably, with the beginning of the conflict in Eastern Europe in February 2022, there has been an increase in prices and greater volatility in international energy commodity prices, especially , of diesel oil.

This situation mainly reflects the lower global supply of diesel compared to current demand, as well as the uncertainties related to the future balance of this market. As a result, diesel inventories in major international markets have shown a sharp decline in recent months.

There is a possibility that the global diesel oil market will be more pressured in the coming months, due to: (i) seasonal increase in world demand in the second half of the year; (ii) lower availability of Russian exports due to the extension and worsening of economic sanctions on the country; and (iii) eventual unavailability of refineries in the United States and the Caribbean with the hurricane season from June to November. Therefore, there are no fundamentals that indicate the improvement of the global balance and the structural retreat of the international quotations of reference for diesel oil.

In a scenario of global scarcity, national supply requires special attention. As the country is structurally deficient in diesel, having imported almost 30% of total demand in 2021, there could be a greater impact on prices and supply. This situation is accentuated given that the national consumption of diesel is historically higher in the second semester due to the seasonality of agricultural and industrial activities. It should also be noted that the domestic market recorded a record consumption of diesel oil last year and this mark should be surpassed in 2022.

Given this situation, it is essential that the practice of competitive prices and in balance with the global market be a reference for the Brazilian fuel market, aiming at national energy security.

* With information from Reuters

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