On Tuesday (16/05), Petrobras announced the end of the Import Parity Price (PPI) – and derivatives, such as gasoline and diesel – with the dollar and the international market. On the same day, reductions in fuel prices were announced. Despite being well regarded by the financial market, the PPI let the government exposed to social instabilities, which in recent years culminated in local and national strikes and declines in popularity.
This Content Is Only For Subscribers
To unlock this content, subscribe to MOVI NEWS.
Threat of Strikes and Social Instability
This issue haunted Bolsonaro’s government, particularly after the worst period of the pandemic. With many changes in Petrobras Presidency – the company had six presidents in his term – it appeared to have tried to influence the company’s price policy but without success. Recently, the government managed to elect six allies to the board, which likely helped this result.
Price Reduction
The President of Petrobras Jean Paul Prates informed that the reductions in the distributors will be of 12.6% for gasoline A, reduction of R$ 0.40 per liter; 12.8% for diesel A, less R$ 0.44 per liter; of 21.3% for cooking gas (LPG), less R$ 8.97 per 13 kg cylinder.
PPI
In the previous rule, the so-called Import Parity Price (PPI), in force since 2016, the price of oil products in the domestic market followed international fluctuations. The government also did not intervene to guarantee lower prices. In the calculation, Petrobras considered the value of oil on the global market and logistical costs: chartering ships, port fees and the use of internal pipelines for transportation.
The New Method
The readjustments will continue to be made without defined periodicity, but now, avoiding passing on to domestic prices the conjunctural volatility of international quotations and the exchange rate. Petrobras’ announcement, however, does not present a clear formula indicating what will be the weight of each factor in the new calculation. Market analysts say that the change was negative, because it is a political intervention in the company. Another negative factor is the lack of clarity in new pricing method.
Our Analysis:
In 2018, the rise in the cost of diesel and sudden price fluctuations led truck drivers to organize a national strike that almost paralyzed the country’s highways. In the following years, the non-fulfillment of demands made that year and the continuous increase in the price of a barrel of oil led to threats of strikes and panic. New episodes were held back by record harvests of agricultural commodities valued at the high dollar and high demand for transport, in addition to the disarticulation between truck drivers’ leaders, the Covid-19 pandemic and political articulations. Although there were no new strikes, price increases continued to affect diesel as well as gasoline and cooking gas. This had a significant impact on preserving food and other essential consumer goods, impacting the popularity of the last government, prompting some protests. Even though the measure can impact investment attractiveness for the country, it could bring more stability to the social scenario and to the government’s popularity.
Source: G1
