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Petrobras Raises Fuel Prices in a Blow to Bolsonaro’s Fight Against Inflation

President Jair Bolsonaro criticized an expected increase in domestic fuel prices by Petrobras, saying the state-owned oil producer has made exaggerated profits during the crisis

A worker refuels a motorcycle at a Petrobras gas station in Rio de Janeiro.
By Peter Millard and Daniel Carvalho
June 17, 2022 | 09:17 am

Bloomberg — Brazil’s state-controlled oil giant Petrobras increased fuel prices in a political setback for President Jair Bolsonaro, who is fighting to contain inflation in an election year.

Petroleo Brasileiro SA (PETR4) raised gasoline prices at its refineries by 5.2% to 4.06 reais ($0.79) per liter in the first adjustment since March, while diesel prices were boosted 14% to 5.61 reais per liter in the first adjustment since May, the company said in a statement. Soaring oil prices and a weaker local currency had widened the gap between domestic and international fuel prices.

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The increase failed to calm investors. Shares were down 3.5% to 28.07 reais ($5.47) at 10:44 a.m. in Sao Paulo.

Elevated prices are one of the main complaints against Bolsonaro as an October presidential election nears, with more Brazilians blaming him for costly gasoline rather than Russia’s invasion of Ukraine. It costs more to fill up a tank of gasoline in Brazil than in most Latin American countries due to high taxes.

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El rendimiento de Petrobras ha sido inferior al de sus pares durante el alza de los precios del petróleo este añodfd

Bolsonaro has publicly lambasted Petrobras for “abusive profits” and has sacked three of its chief executive officers over frustration with the company’s wholesale fuel prices that track international levels. The oil producer has underperformed other crude majors since the war in Ukraine started, and erased gains for the yearn Friday. Investors are concerned it will sacrifice profits at the government’s request to help contain fuel inflation.

Profits before benefits for the people

Earlier in the day, Bolsonaro had criticized the expected increase in domestic fuel prices by Petroleo Brasileiro SA, saying the state-owned oil producer has made exaggerated profits during the crisis, without taking into account Brazil’s “public interest.”

“Petrobras may plunge Brazil into chaos,” Bolsonaro said in a Twitter post early Friday, referring to the oil giant. “Its chief executive, directors and board members know very well what happened when truckers went on strike in 2018, with the nefarious consequences for Brazil’s economy and the life of our people.”

A nationwide stoppage by truck drivers such as the one that paralyzed Brazil during the Michel Temer administration is a nightmare scenario for Bolsonaro, who’s trailing former President Luiz Inacio Lula da Silva in opinion polls less than four months ahead of elections. A growing number of Brazilians already blame the incumbent for the country’s economic problems, according to the polls.

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During a live social media broadcast Thursday, Bolsonaro said that any increase in fuel prices at this moment would be politically motivated and that he expected Petrobras to delay its decision until next week, when congress is expected to vote on a series of proposals to lower or eliminate fuel taxes. He also said the government is trying to replace the company’s chief executive and some board members by the end of next week.

Bolsonaro’s allies echoed his fury. Lower house Speaker Arthur Lira said he will meet with party leaders on Monday to discuss the issue. Lawmakers are considering whether to reassess Petrobras’s pricing policy, increase taxes on its profits and even launch a congressional probe into its board members, according to O Globo newspaper.

Petrobras seems ready to “bomb” the country with a new fuel price increase, Lira wrote in a Twitter post, comparing the oil company to an “independent country at war with Brazil.”