Cooking gas price rises sharply, impacts household budgets in Brazil

RIO DE JANEIRO, BRAZIL – Essential for homes, cooking gas has weighed even more heavily in the pockets of poor families during this pandemic period. Since May last year, the price of a gas cylinder has increased five times more than inflation.

The price of the cylinder rose in the second semester last year; however, the worst moment occurred this year. According to the IPC-S, the inflation indicator of the Getúlio Vargas Foundation’s (FGV) Brazilian Institute of Economy (IBRE), used in salary and rent adjustments, prices soared 11.45% from January to April and 17.25% in the 12 months starting May 2020, while the official inflation stood at 3.5%.

“LPG is the main energy source used in food preparation by low-income families. It is the gas that enters communities all over Brazil. Something that rises more than the average salary demands a huge effort from families. With the current high level of unemployment, it is even more difficult. To run out of gas is to run out of food,” said André Braz, assistant coordinator of the Consumer Price Index at IBRE/FGV.

The economist believes that the rise in price of the product will be shown in the next Family Budget Survey by IBGE. The last one, conducted in 2018, recorded that the average Brazilian spends 1% of their budget on cooking gas. Rent accounts for 3.6%, and natural gas for 0.12%.

In the home of André Lima e Silva, in Fortaleza, meals began to be prepared in the neighborhood. “Until we received the government voucher, we didn’t have gas for three days. We even asked the neighbor to cook the baby’s porridge,” says the baker, unemployed since early last year. He and his wife began to support their five children by selling savory snacks.

The increase in the price of gas has also affected the business of Marcos Magalhães, responsible for a buffet in Rio de Janeiro. “The gas increases, we have to pass the value on to the clients, but we can’t pass it on in full, because, unfortunately, clients aren’t getting a raise. No one is getting a raise in the country. It’s complicated,” he said.

In an event last month, Bolsonaro said he would discuss the issue with the new president of the state-owned company, Joaquim Silva e Luna.

“We are working with the new president of Petrobras on how to reduce the price of cylinders at the source. Today it is R$42 (US$8.32), it is possible to lower it,” said the president speaking in Mato Grosso do Sul, on May 14. However, he failed to say with whom he is discussing the issue and the position of the president of Petrobras.

Since he took office on April 19, Silva e Luna has not changed the price of liquefied petroleum gas (LPG). The 13-kg cylinder is the product’s household version. The most recent readjustment, the fourth this year, occurred on April 2, under the administration of his predecessor Roberto Castello Branco.

When asked, Petrobras replied through its press office that there are no plans for LPG price readjustments with a minimum monthly frequency: “We reiterate that readjustments are made at any time, without a defined periodicity, according to market conditions and external scenario analysis. This allows the company to better compete in an efficient and flexible way and prevents the immediate pass-through to domestic prices of external volatility caused by conjunctural issues.”

Nevertheless, the end price of LPG remains at its highest level on record, as published by the National Petroleum, Natural Gas and Biofuels Agency (ANP). In March, the last data released by the regulator, the product cost an average of R$83.17 in Brazil. As Petrobras readjusted it once again in April, it is possible that the most recent statistics will show a new record.

Adilson de Oliveira, professor at the Federal University of Rio de Janeiro’s (UFRJ) Economics Institute, believes that the solution is to stabilize prices, which can be achieved with the creation of a fund, as the government is considering.

He recalls that under Fernando Henrique Cardoso’s government, the ‘Gas Aid’ was implemented and, under Luiz Inácio Lula da Silva’s government, the benefit was incorporated into the Bolsa Família (Family Grant). “The federal government talks, but hasn’t yet put its proposal on the table. We need to know where it wants to go,” he said.