Brazil’s Petrobras Unveils New Price Policy, Lower Fuel Prices

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Brazil’s oil giant, Petrobras, announced on Friday a reduction in gasoline and diesel prices at its refineries and a new fuel price policy. According to company officials, an executive group will meet at least once a month to review fuel prices.

“This committee will decide whether to make the adjustments of cutting, raising, lowering or maintaining prices,” said Pedro Parente during a press conference on Friday to announce the creation of the Executive Markets and Prices Group and the price reduction of gasoline by 3.2 percent and diesel by 2.7 percent at Petrobras’ refineries.

The CEO also emphasized that the Petrobras fuel prices will not fall below cost prices ‘under any circumstances’. In the past the government has maintained fuel prices stable or even decreased prices for political gains, resulting in significant losses to the petroleum company.

Parente said that when establishing fuel prices, the group will take into consideration the international parity price (IPP), the margin for additional compensation for risks inherent in the operation and market participation level. Prices will never fall below the IPP, which includes freight and transport costs and port taxes, according to officials.

According to analysts, the reduction in gasoline and diesel prices at refineries should lead to a decrease of fuel prices at the pumps, by 1.4 percent (gasoline) and 1.8 percent (diesel). This is the first time Petrobras has reduced the prices of some of its oil derivatives since June 2009.

For Petrobras officials, this new price policy will be important to attract partners in the refining sector. “(We want) to give clear signals to the market that we want to attract partners to the downstream business, logistics and refining, mainly. For this we need to have a consistent policy of adhering prices in our market share,” said Jorge Celestino, Petrobras’ director of Refining and Natural Gas.