Petrobras has the highest profit among major oil companies while Brazil’s population is impoverished

RIO DE JANEIRO, BRAZIL – Brazil’s state-owned company Petrobras, one of the largest oil companies in Latin America, posted a profit of US$8.6 billion in Q1 2022, ranking second in profit-to-revenue ratio.

Petrobras converted 31.6% of its revenues into profits in 1Q2022. The Brazilian state-owned company is the second most profitable among the major oil companies analyzed by Poder360. It is surpassed only by China’s CNOOC, which generated a profit of 37.7% of revenues during the period.

Read also: Opinion – Number of Brazilian families in extreme poverty to increase by 11.8% in 2022

However, Petrobras has the highest profit in the ranking: US$8.6 billion, or R$44.6 billion, in the January-March period. It outperforms major oil companies such as Shell, Chevron, ExxonMobil, TotalEnergies, Equinor, and BP.

The used Generally Accepted Accounting Principles (GAAP) data, an accounting standard recognized by the U.S. Securities and Exchange Commission (SEC).

This information may differ from that reported by oil companies, which generally highlights adjusted earnings, i.e., excludes depreciation, restructuring charges, and divestitures.

Not all companies report adjusted earnings. When they do, they apply different criteria, making it difficult to compare results.

The war in Ukraine has benefited the Rio-based state-owned company. At the start of the conflict, some companies announced they would cease operations in Russia.

Their Q1 earnings reports reported losses related to the devaluation of their assets in the country or to divestments.

The losses amounted to US$38 billion at the five majors, as the world’s largest oil companies are called. These losses reduced the profitability of the companies and contributed to Petrobras being at the top of the ranking.

Another factor is that the war has increased the price of barrels. From January to March, the average cost of Brent crude was US$101.4. The last time the commodity reached this level was in 2014.

In the 1st quarter, Petrobras exports increased by 23% in volume. It sold 543 thousand barrels per day, equivalent to US$4.8 billion in sales.

According to the state-owned company, it was the segment of exploration and production of oil and natural gas that attracted the profits during the period. This segment accounted for 80% of the reported R$44.6 (US$8.6) billion. The remaining 20% came from other segments, including refining.

According to José Mauro de Morais, Coordinator of Studies in Oil and Gas of Ipea (Institute of Applied Economic Research), Petrobras has low extraction costs in the pre-salt area and the barrel price, which helps explain the oil company’s results.

The increase in exports and the fact that the state-owned company supplies most of the oil refined in the country also make the results predictable.

“Petrobras is the largest seller of petroleum in the Brazilian market, so it is only natural that the company makes a high profit because of this large market share,” he said.

Speaking to the press on Friday (6), the new president of Petrobras said that there is “no significant correlation” between the state-owned company’s profits and the fuel adjustments made at its refineries. José Mauro Coelho made the statement without directly referring to President Jair Bolsonar’s criticism of profits.

The conservative Brazilian president has been criticizing the oil company’s profits since Thursday (5) when the results were released. In his weekly live broadcast that same day, he even called the results “rape.”

On Saturday (7), he again called on Petrobras not to raise fuel prices again. He said that the state-owned company was making billions in profits “at the expense of the people” and that “Brazil can no longer endure an adjustment in fuel prices in a company that takes in tens of billions annually.”

The state-owned company has been following an import parity pricing policy (PPI) since the Michel Temer government took office in October 2016. The PPI equates domestic prices with prices on the international market and more often passes on fluctuations to consumers. Fuel prices are also rising with the devalued real and rising oil prices.

Although Petrobras’ last adjustment was in March, prices have been breaking records ever since. Last week, the average price of gasoline was R$7.29 per liter – the highest in the ANP’s (National Agency of Petroleum, Natural Gas and Biofuels) historical series, which began in 2004 and an equivalent of US$5.50 per gallon. Diesel reached its highest level in the series during the week of April 17-23, with an average price of R$6.73.

According to the latest PPI report released Friday (May 6) by the Brazilian Association of Fuel Importers (Abicom), the average difference is 21% for diesel and 17% for gasoline.

In a conference with analysts on Friday, José Mauro reiterated the continuity of the state-owned company’s pricing policy. “We will remain committed and stick to the strategies outlined in our strategic plan,” he said. He then told journalists that Petrobras is trying to put increases in place to avoid passing on the instability of fuel prices.

According to Petrobras’s director of marketing and logistics, Claudio Mastella, the state-owned company is waiting for a “stabilization” to readjust the values.

José Mauro is the third to take over Petrobras under the Bolsonaro government. His predecessors, Roberto Castello Branco and Joaquim Silva e Luna were fired after being worn down by successive increases in fuel prices. When they took over Petrobras, they did not change pricing policies.

In the run-up to the election dispute, former President Luiz Inácio Lula da Silva (PT) said he would end PPI. “It is important that the shareholder receives his dividend when Petrobras makes a profit, but I cannot enrich the shareholder and impoverish the housewife,” he wrote on Twitter in early February.

The number of Brazilian families in extreme poverty registered in the country’s CadÚnico (Unified Registry) will increase by 11.8% by 2022.

But not only has the impoverished population increased in Brazil. Just a few days ago, it was announced that more than 50% of all households in the country must now be considered poor.

Often they are working poor. They maybe have a house, a car, furniture – all on credit – but they can no longer drive around and eat only the cheapest food, if at all regularly.

According to a poll conducted by PowerData between April 24 and 26, 67% of the Brazilian population supports government intervention at Petrobras to lower fuel prices.

With information from Poder360