RIO DE JANEIRO: The price of gasoline in the Brazilian market has slipped below that in international markets, potentially saddling cash-strapped state-run Petroleo Brasileiro SA with more losses on fuel imports.
Wholesale gasoline is now more than 5 percent cheaper at Brazilian refinery gates than international prices, according to analysts surveyed by Reuters. Petrobras, as the company is known, has not faced a higher import price since October when plunging world crude and fuel prices allowed Petrobras to stop subsidizing imports for the first time in several years.
“There has been no incentive to import gasoline for weeks and for diesel, the little (incentive) that there was died last week,” Luciano Liborio, a director of Brazil’s fuel distributors’ association Sindicom told Reuters.
Petrobras must import fuel because its 13 domestic refineries cannot meet all of the needs of Brazil, the world’s seventh-largest economy. Brazil’s government, though, seeking to keep a lid on inflation, has long prevented Petrobras from raising fuel prices in line with world prices.
That policy cost Petrobras’ refining division about 60 billion reais ($20 billion) in losses in recent years. Coming in the midst of a $221 billion five-year investment plan, it forced Petrobras to boost borrowing. This helped make Petrobras the world’s most-indebted and least-profitable major oil company.
As a corruption scandal further undermined Petrobras’ finances, the government allowed oil company to raise domestic fuel prices in November, ending the subsidy.
Since then Brazilian domestic gasoline prices have averaged 17 percent more than imports, according to Tendencias Consultoria, a Sao Paulo-based economic research group. The price is now 5.8 percent cheaper.
This helped ease the previous losses and gave Petrobras room to slow output and perform maintenance at its domestic refineries which were running at near full capacity.
Diesel, which is still cheaper abroad, has seen domestic and international prices converge. While diesel has been an average of 20 percent more expensive in Brazil than abroad since November, Brazil’s most-used motor fuel is now only 3.8 percent cheaper in international markets than at Brazilian refinery gates, reducing Petrobras’ profits on imports.
