Minister says Petrobras has space to reduce fuel prices

Following recent reports of Mines and Energy Minister Alexandre Silveira’s push for Petrobras to reduce fuel prices, the minister himself has publicly acknowledged that the conditions are favorable for such adjustments. He attributes this possibility to the drop in oil prices, which he attributes to tariffs issued by U.S. President Donald Trump.

“Bearing in mind this week’s Brent prices, we have all the necessary conditions to lower prices,” the minister declared on Tuesday, underlining that “it’s essential to note that the Brent price significantly reflects the irrational decisions taken by the U.S. president.”

Brent crude experienced a 2.16% decrease on April 8, settling at $62.82. Since the tariff announcement by Mr. Trump on April 2, the commodity has seen a total loss of 15.47%. Concurrently, Petrobras’s most widely traded preferred shares dipped by 3.56% on Tuesday, reaching R$32. Since Mr. Trump’s announcement, the stock has encountered a cumulative descent of 14.21%.

Analysts at UBS BB suggest that the recent decline in oil prices has opened up the opportunity for Petrobras to implement further price cuts. According to the bank’s calculations, the state-owned company could reduce gasoline prices by 10%, which amounts to R$0.30, and diesel prices by 5%, equating to a range between R$0.15 to R$0.20. These estimations account for the R$0.17 diesel price reduction announced by Petrobras, effective April 1, corresponding to a 4.6% decrease.

In April of the current year, Petrobras initiated a reduction in diesel prices for the first time since 2023, under the leadership of Jean Paul Prates. Prior to this month’s modification, the company had raised fuel prices by R$0.22 per liter in February, following over a year without adjusting diesel prices. Gasoline prices, which observed an increase in July 2024, have remained static.

Despite noting persistent government pressure on Petrobras to lower fuel prices, UBS BB analysts remain cautious about the timing of these alterations: “We anticipate that Petrobras will sustain prices for an extended period until there is market stability indicating where prices and exchange rates will normalize.”

According to consultancy firm StoneX, Petrobras’s gasoline prices stand 8.4% above the import parity price, or R$0.25, while diesel prices are 7.5% higher, or R$0.26. An analysis by Itaú BBA indicates that diesel prices stand 7% above international rates, with gasoline prices exceeding them by 4%.

When approached for comment, Petrobras opted not to respond to this issue. In a filing submitted to the U.S. Securities and Exchange Commission (SEC) on April 3, Petrobras stated that fuel price adjustments will continue without a predefined timetable. This approach aims to prevent transferring the volatility of international oil prices and exchange rates onto the domestic market. However, the state-owned company acknowledges the potential for pricing policy adjustments and government interventions concerning derivative pricing.

Petrobras further disclosed in its Form 20-F that potential changes in pricing strategy and government initiatives regarding derivative pricing could manifest in the future, given the federal government’s status as the majority shareholder. The document also references the adoption of a commercial strategy since May 2023, prioritizing competitive pricing through sales hubs rather than the import parity price (PPI) formula. This strategy aligns pricing decisions with market stability and could result in periods where prices deviate from international norms.

The company emphasized that actions and regulations imposed by the Brazilian federal government could influence pricing decisions, considering the government’s majority shareholder position. It did not rule out the possibility of proposed changes by the company’s board of directors or management, especially since “Representatives of the Brazilian federal government have sometimes expressed their opinions on the need for our prices to consider internal conditions.”

This statement by Petrobras comes amid a challenging landscape following Mr. Trump’s tariff announcement and the OPEC+ decision to raise oil supply by 411,000 barrels daily beginning in May. Minister Silveira also highlighted the global instability stemming from Mr. Trump’s policies and emphasized President Lula’s proactive involvement in international discussions to mitigate the implications of this turbulent situation.

Reiterating his endorsement for environmental licensing for oil and natural gas exploration in the Amazon river’s mouth within the Equatorial Margin, Minister Silveira revealed that a meeting scheduled with Brazilian Institute of Environment and Renewable Natural Resources (IBAMA) President Rodrigo Agostinho was canceled. Discussions on this subject will now continue with Environment Minister Marina Silva.