Brazil will face shortage of public buses if diesel price keep rising, says transport association

RIO DE JANEIRO, BRAZIL – Brazil’s NTU (National Association of Municipal Transport Companies) has warned in a statement that there will be shortages of transport in major cities if diesel prices rise again – which could be announced by Petrobras in the coming days.

Fuel has risen 35% this year alone, the association announced Thursday (5). Here is the NTU’s full announcement.

“If the sources to cover these additional costs are not fixed, operators will be forced to ration fuel and offer trips only during peak hours, mornings, and afternoons,” said NTU President Francisco Christovam.

“During the rest of the time, buses will have to stay in garages. The companies do not want to be selective and serve only the lines and times with the greatest demand, but they will be forced to take this radical measure because they can no longer bear the successive cost increases and losses.

A total of 43 million passengers rely on this service every day.

According to the NTU, the buses operate only during peak hours and stop operating in the morning and afternoon, at night and on weekends.

“The overwhelming majority of our members are strapped for cash to absorb another change; there is no way to buy diesel to run the service, to put a bus on the road with an empty tank would be irresponsible,” Christovam says.

“The consequence of this increase, if it comes, will be the deterioration of the quality of transport. And it is the population that will suffer as a result of the necessary measures being postponed.

Diesel is the second most important cost factor in city bus fares, after labor, accounting for an average of 30.2% of the total cost of public transportation services.

“The increases recorded from January to now, on the order of 35% at refineries, are already equivalent to a 10.6% increase in public bus transportation costs this year alone.

According to NTU, this impact has not yet been offset by fare increases or subsidies from municipalities contracting public transport services.

According to Abicom’s (Brazilian Association of Fuel Importers) calculations, the adjustment in diesel and gasoline prices would have to be 24% and 12%, respectively, to maintain Petrobras’ price parity (exchange rate fluctuations and increases in international oil prices).

The new president of Petrobras, José Mauro Ferreira Coelho, has already stated that he will maintain the policy of market prices for fuels.

For the NTU president, the solution lies in the introduction of mechanisms to stabilize fuel prices, ranging from a reformulation of the tax structure levied on diesel fuel to a special pricing policy for important sectors such as public transport.

Another alternative, according to the executive, would be to separate the public tariff for bus use from the technical tariff or remuneration of operators’ costs, with the difference borne by the public sector.

The NTU also proposes two other measures to solve the problem:

• The exemption of all taxes levied on the operating resources used by public transport, which together result in a tax burden of 35.6%, which is extremely high for an essential service used mainly by the low-income population;
• The use of the federal government’s share of the results generated by Petrobras to offset the impact of the increase in diesel consumption in public transport. In 2021, Petrobras recorded a record net profit of R$106.6 (US$21.2) billion, and the federal government has a 36.7% share in this result, which will tend to increase with the new price adjustments.