Petrobras Gasoline Price Reversal Sparks Market Concerns Over Government Interference

Petrobras revoked a planned increase in gasoline prices just hours after announcing it, a move that market analysts say weakens the company's credibility and raises fears of federal government interference ahead of the presidential election. The reversal occurred shortly before 1 a.m. on Thursday, approximately four hours after the initial announcement. While the state company provided no detailed explanation for the change, sources from the company and the government attributed the shift to a communication error regarding a new subsidy.

On Wednesday, President Luiz Inácio Lula da Silva announced a package to contain fuel prices, increasing the gasoline subsidy from R$ 0.44 to R$ 0.63 per liter. Petrobras initially planned to keep the additional R$ 0.19, which would have raised refinery prices. However, the company later reversed this decision so the amount could be passed to distributors and potentially to the final consumer, aligning with President Lula's goal to lower fuel prices before the elections.

Analysts from BTG Pactual and Itaú BBA noted that the lack of a clear business justification for the reversal reinforces investor concerns regarding the independence of the company's pricing decisions. This is particularly concerning as Petrobras operates with significant gaps compared to international import parity. According to Abicom, Petrobras gasoline prices were R$ 0.97 per liter, or 32 percent, below import parity on Friday. Other estimates from Abicom and Itaú BBA suggest the difference could be as high as R$ 3.55 or R$ 3.13 per liter.

While Petrobras does not import gasoline, there is growing concern regarding diesel prices, as Brazil relies on foreign markets for the fuel. Analysts warn that if conflicts in the Middle East intensify and international oil prices rise, there may be further pressure to keep diesel prices low through the electoral period, breaking the previous pattern of coordinating subsidies with price adjustments.