Brazil Cut the Fuel Tax and Petrobras Raised the Price on the Same Night
BRAZIL · FUEL PRICES
Key Facts
- —The announcement At about 21:35 on Tuesday, Petrobras said its gasoline A price to distributors would rise by a combined R$0.63 a litre from 10 September.
- —What was in it R$0.19 of genuine cost increase, plus the expiry of a R$0.44 subsidy that had applied since May under MP 1.358.
- —The correction At 00:48 on Thursday the company corrected the figure. With the government’s simultaneous tax cut applied, the price to distributors is R$3.05, down R$0.19.
- —The tax cut A decree signed 9 September cut PIS and Cofins on gasoline by R$0.63 a litre and zeroed federal taxes on hydrous ethanol until 9 October.
- —The credit MP 1.389, signed 8 September, opens R$6.605 billion in extraordinary credit for the ANP.
- —The running cost Planning Minister Bruno Moretti put the package at around R$7 billion a month.
Brasília cut the tax by R$0.63 and Petrobras raised the price by R$0.63 on the same night. Then the arithmetic was restated and the two cancelled into a small cut.
Brazil spent Wednesday building a fuel subsidy and Wednesday night watching it appear to evaporate, before a corrected calculation put the pump price marginally lower than where it started.
The Sequence
On 8 September Lula signed Medida Provisória 1.389, published in the official gazette the next day, opening R$6.605 billion in extraordinary credit for the national petroleum agency. Of that, R$5.607 billion funds road diesel subsidies and R$998 million funds subsidies for fuel production and imports.
On 9 September a separate decree cut PIS and Cofins on gasoline by R$0.63 a litre, bringing the federal charge down to R$0.16, and temporarily zeroed federal taxes on hydrous ethanol, worth another R$0.19. Both run from 10 September to 9 October.
At around 21:35 the same evening, Petrobras told distributors its gasoline A price would rise by R$0.63 from 10 September, to R$3.24 a litre.
At 00:48 on Thursday morning, the company corrected the communication. Applying the government’s tax cut, the actual price to distributors is R$3.05, a reduction of R$0.19.
What the R$0.63 Actually Was
It is worth being precise, because the coincidence of two identical numbers has caused confusion.
Petrobras’s R$0.63 was not a price rise in the ordinary sense. R$0.19 of it is a genuine increase in the reference price. The other R$0.44 is the expiry of a subsidy that had been running since May under MP 1.358.
The government’s R$0.63 is a tax cut of the same size, arriving on the same day. Net of both, the distributor pays R$0.19 less.
Brazilian outlets described the change as Petrobras correcting its information. The Rio Times has not seen the company describe it as a calculation error, and does not report it as one.
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The Cost of Holding the Line
Gasoline subsidies rise 43 percent under the September package. Diesel gets a new benefit of R$1.00 a litre for producers and importers, reviewed monthly by the Treasury.
Planning and Budget Minister Bruno Moretti put the combined impact at around R$7 billion a month, and framed it as fitting inside existing headroom. We are using the fiscal space we have, he said, without asking for additional space.
That is a defensible statement about the budget and a less comfortable one about the trajectory. A subsidy reviewed monthly is a subsidy whose end date is a political decision rather than a fiscal one.
Why Now
Brent crude passed US$100 a barrel on 9 September, reaching US$100.19 in early European trading, its highest since July and the fourth consecutive session of gains.
The driver is the Middle East. Iran’s Revolutionary Guard has claimed attacks on United States warships and bases in Jordan, and United States Central Command has confirmed destroying five vessels it links to the IRGC.
Brazil produces more oil than it consumes and still imports refined product. It is exposed to the price rather than protected from it, which is why an external shock arrives at a Brazilian pump inside a fortnight.
The mechanism now visible is a government absorbing that shock at roughly R$7 billion a month while the price it is absorbing is set by events it has no influence over.
More: Brazil news in English, every day from The Rio Times.
Background: Oil Wrap: Guyana Boom, Petrobras Pre-Salt Rise on Monday.
Frequently Asked Questions
Did the price of gasoline go up or down?
Down slightly. Petrobras’s price to distributors is R$3.05 a litre from 10 September, R$0.19 below the previous level, once the government’s tax cut is applied.
What was the R$0.63 rise then?
R$0.19 of genuine cost increase plus R$0.44 from the expiry of a subsidy that had run since May. The government cut taxes by the same R$0.63 on the same day.
How much is the package costing?
Planning Minister Bruno Moretti put it at around R$7 billion a month. MP 1.389 opens R$6.605 billion in extraordinary credit.
What happened to diesel?
It gets a new subsidy of R$1.00 a litre for producers and importers, reviewed monthly by the Treasury.
Why is this happening now?
Brent crude passed US$100 a barrel on 9 September on Middle East supply fears, its highest level since July.
Sources: Poder360, Agência Brasil, Money Times, Exame, Canal Rural, SpaceMoney, Renascença.
This article was drafted with automated assistance and reviewed before publication. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief
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