Brazil is self-sufficient, but how much further to become an oil giant?
RIO DE JANEIRO, BRAZIL – Brazil has been considered self-sufficient in oil since 2015 when the country started producing more than it consumes. According to government data, Brazil manufactures more than three million barrels per day of the so-called “black gold.”
Although impressive, the figure is less than a fifth of the production of the United States, the world’s largest oil producer. The country is also behind Saudi Arabia and Russia, which complete the top three positions, with more than 10 million barrels per day.
Brazil is in ninth place among the largest oil producers in the world ranking. The data are from July 2021 and were compiled by the Brazilian Institute of Oil and Gas (IBP).
- United States – 16.476 million barrels per day (MMbbl/d)
- Saudi Arabia – 11.039 million barrels per day
- Russia – 10.667 million barrels per day
- Canada – 5.135 million barrels per day
- Iraq – 4,114 million barrels per day
- China – 3.901 million barrels per day
- United Arab Emirates – 3.657 million barrels per day
- Iran – 3.084 million barrels per day
- Brazil – 3.026 million barrels per day
- Kuwait – 2,686 million barrels per day
Worldwide, 88.4 million barrels of oil per day are produced. Brazil is currently responsible for only 3% of world production.
The United States (19%), Russia (12%), Saudi Arabia (12%), and Canada (6%) are responsible for almost half of all the “black gold” produced in the world.
Brazil is expected to have a 10% growth in oil production this year.
According to the Minister of Mines and Energy, Bento Albuquerque, due to high market demand, requests for more production from other nations, and Russia’s military operation in Ukraine.
If Brazil’s production increases by 300,000 barrels per day, the country will reach 3.3 million barrels per day and could overtake Iran in production, moving closer to the 7th position, currently held by the United Arab Emirates.
WHY DOES BRAZIL IMPORT FUELS IF IT IS SELF-SUFFICIENT IN OIL?
Despite being considered self-sufficient in petroleum, Brazil buys derivatives of this natural resource from abroad due to the product characteristics extracted in the country and the structure of our refineries.
A good part of our refineries was built in the 1970s when light oil was imported.
With the discovery and extraction of the resource in the Campo Basin, the refineries adapted to refine the Brazilian product, which was of the heavy type.
More recently, with the pre-salt extraction, Brazil started to obtain a medium type of oil. With no specific machinery in the refineries for this type of fuel, it began to be exported.
Brazil imports oil derivatives to compose a “blend” – a mixture of Brazilian oil with other types that allow refining here.
HOW IS THE PRICE POLICY IN THE COUNTRIES?
In Brazil, oil and its derivatives prices follow the dollar exchange rate.
This policy is called international parity pricing (IPP) and was implemented in 2016, during Michel Temer’s government. The readjustments have no fixed deadline.
Since then, gasoline and diesel oil had a 157% increase, compared to an inflation rate of 31.5% in the period, according to the Single Petroleum Workers Federation (FUP).
A similar situation happened in the United Arab Emirates. Until 2015, the state-owned companies had to bear the difference between the import price and the price charged in the domestic market. The values started to follow the international quotation from that year on, and the readjustments are monthly.
China has adopted a similar policy since 2013, adjusting the price of gasoline every ten working days according to the fluctuation of the international market.
Iraq and Saudi Arabia are also on the list of countries cutting government subsidies on fossil fuels and adopting parity with the international price.
However, these countries are on the International Energy Agency’s (IEA) list of those that gave the most subsidies for fossil fuel consumption in 2020.
China’s government spent more than US$21.7 billion (1st place) on subsidies for oil products, followed by India (2nd place) and Saudi Arabia (3rd place). Iraq comes tenth on the list.
On the side of those who subsidize gasoline is also Iran. The country is seventh on the IEA list and has one of the cheapest fuels in the world. A liter of gasoline costs US$0.051, according to Global Petrol Prices, an organization that monitors fossil fuel prices across the globe.
In the United States, there is total freedom to readjust prices. The international price oscillations are passed on to the distributors, who transfer them to the gas stations. However, the variations are not usually daily because the companies use their stocks to buffer them.
The same situation occurs in Canada, but the country taxes fossil fuels heavily to inhibit their consumption and stimulate the use of sustainable alternatives. Currently, Canadians pay US$0.07 for each liter of fuel due to the carbon emission tax.
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