Brazil: Oil price drops to pre-war level, should bring down gasoline and diesel prices

Fuel prices have been falling in Brazil, with successive announcements of cuts. Oil, which in the recent past made gasoline prices skyrocket, has recently returned to the pre-war level of US$90 a barrel, as before the war in Ukraine, which should pull down the cost of fuels such as gasoline and diesel in the country.

According to experts consulted by UOL, the fall in oil prices is linked to a slowdown in the world economy, especially in the US and China, and the increased commodity supply.

The global growth projections are falling, with inflation and interest rates worldwide, reducing demand for products. As we have already had the worst of the Russia-Ukraine war effect, now the focus is on the world economy slowing down, which makes the price of oil fall, says Rodrigo Glatt, partner at the GTI management company.

According to Paulo Dutra, an economics professor at FAAP, the interest rate hike in the USA to try to hold down the impacts of the war on the country’s economy threatens to take the world’s largest economy into recession at a time when China is also slowing down.

It has developed into a recessionary process, especially as China slows down. The country is consuming less energy and, consequently, other inputs, says Dutra.

Besides, there is also the expectation of Iran’s return to the international market soon, supplying more oil and reducing prices.

The country owns the third largest oil reserves in the world, according to OPEC (Organization of Petroleum Exporting Countries) data, behind only Venezuela and Saudi Arabia.

There is also an effort by the US government to reduce the price of energy and fuel in the country, which has risen with the war in Ukraine. The White House has invited the CEOs of seven oil companies to a meeting to discuss ways to increase production capacity and reduce fuel prices.

Oil, which surpassed the barrier of US$110 a barrel in March at the beginning of the conflict in Ukraine, reached US$93.15 a barrel two weeks ago.

Reuters data indicate that Brent crude futures closed at US$96.72 a barrel last week, up US$0.13.

According to Citi bank, if the recession in the USA happens, the price of crude oil can fall to US$65 a barrel by the end of this year and go to US$45 by the end of 2023. The expectation, however, is not unanimous. For Goldman Sachs, the forecast is that the barrel will be above US$100 by the end of this year.

What happens with fuels in Brazil? According to the economics professor at UFRJ and Ineep researcher Eduardo Costa Pinto, if the barrel of oil continues to fall, fuel prices in Brazil should follow the drop.

With the recent drop in commodity prices, Petrobras announced the third straight price reduction in less than a month last week.

With information from UOL