Brazil: The Oil Exporting Giant That Needs to Import Fuel

(Background) In 2006, Petrobras announced Brazil’s oil self-sufficiency, noting that the country produced as much oil as it consumed.

Since then, production has surged. By 2023, Brazil extracted 3.4 million barrels of oil daily.

However, the nation’s refining capacity lags at just 2.3 million barrels per day (bpd).

This surplus oil goes abroad. In 2023, Brazil exported 1.6 million barrels per day. This is 19% more than in 2022.

To put it in perspective, this is half of the United Arab Emirates’ exports. Out of the 23 OPEC+ members, nine export less than 1.6 million bpd.

Despite being a top oil exporter, Brazil faces a paradox. It also imports large amounts of fuel.

In 2023, Brazil imported 14.7 billion liters of diesel. Of every ten truck trips, 2.2 used imported diesel. The country imported 22.4% of its diesel consumption.

One in ten truck trips burned exclusively Russian diesel, cheaper due to commercial embargoes.

Russia supplied half of Brazil’s imported diesel. The United States provided 25%. For gasoline, of every R$300 spent on fuel, R$37 went towards imports.

In 2023, Brazil consumed 33.3 billion liters of gasoline, excluding the 27.5% ethanol mix. Of this, 4.2 billion liters were imported, making up 12.5%.

The problem lies in Brazil’s refining capacity not matching its oil production growth.

Normally, this would attract private investment to increase refining capacity.

However, until 2019, Petrobras controlled 98% of Brazil’s refining. Competing against this giant was daunting for new players.

Brazil: The Oil Exporting Giant That Needs to Import Fuel

In 2019, under Bolsonaro, the antitrust agency Cade ordered Petrobras to sell eight of its 13 refineries.

This move aimed to reduce Petrobras’s dominance and create a competitive market. The goal was for the market to balance refining capacity with oil production.

The plan did not fully succeed. Only three refineries were sold. Petrobras’s monopoly reduced to 78%.

However, it still controls 1.8 million bpd of refining capacity. This level of control stifles competition.

Companies that bought refineries find themselves dependent on Petrobras. It controls most fuel production.

This dependency sets profit margins by the state. True competition remains limited. Petrobras still dominates the market.

On May 22, Cade confirmed this situation. Petrobras no longer needs to sell the remaining five refineries.

It will maintain its 78% market share. This share could increase if it buys back any sold refineries.

This decision ends reliance on the market to solve refining issues. Control returns to the state. The state created the problem.

This situation highlights the complexity and challenges in balancing oil production and refining capacity in Brazil.

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