Cut in diesel follows Petrobras policy and oil drop, analysts say

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The reduction of BRL 0.22 in the price of diesel for distributors announced this Thursday (11) by Petrobras follows the state-owned company’s pricing policy, experts say to CNN Brasil Business .

The new value, which will come into effect on Friday (12), is linked to two downward movements: Petroleum It’s from dollar .

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With this, the state-owned company had room to make the second cut in the price of diesel in a week, after a sequence of six highs between September 2021 and June 2022.

Causes

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The announcement by Petrobras is a “sign of normality and continuity of the import parity policy”, according to Adriano Pires, director of the Brazilian Center for Infrastructure and Energy (CBIE).

He claims that diesel in Brazil is more expensive than on the international market, so it was necessary for the state-owned company to reduce the price to comply with the international parity policy.

Pires believes that the decision was not politicized, since the price policy gives room for both increases and reductions.

For him, the main factor behind the cut was the recent devaluation in the price of oil. In July, the barrel type Brent a benchmark for Petrobras, returned to trading below US$ 100.

The drop reflected factors such as the announcement of increased production by the Organization of Petroleum Exporting Countries (OPEC ) and, especially, the revision of projections for global demand, with the expectation that countries consume less oil as their economies slow down to combat the inflation and are at risk of entering a recession.

“The price of oil fell due to the recessionary concern with the high interest rates in the United States, so it is retreating even with the war in Ukraine”, he points out.

Rafael Felipe Schiozer, finance professor at FGV EAESP, also sees the basis in Petrobras’ announcement, and highlights that, in addition to the drop in international oil and diesel prices, there was a weight of exchange in the decision.

“The dollar has been falling for about three weeks, which translates into fuels, and the price of diesel on the international market has dropped compared to the end of July, by almost 10%”, he says.

He points out that Petrobras recently adopted a policy of passing on the variation in gasoline prices more frequently than in diesel, which leads to more spaced readjustments.

“The logic is that diesel prices have a more medium and long-term impact on other prices, considering carriers, and they need to protect themselves more from the variation if it occurs quickly. When you pass it on less frequently, the readjustment value is higher”, he explains.

In this sense, Sergio Araujo, executive president of the Brazilian Association of Fuel Importers (abicom ) considers that the cut in diesel is “consistent” with the price policy.

“We pointed out a lag of R$ 0.60 in diesel compared to abroad before the announcement, so it was a very reasonable readjustment. What we expect is that pricing will continue like this, when prices rise in the international market or exchange, it increases, and if both fall, the price drops”, he says.

Impact on inflation

Schiozer says that the cut in the price of diesel, which already totals R$ 0.44 in a week, should be felt in two ways in terms of inflation.

The first is straightforward, since diesel is part of the basket of products accompanied by the Broad Consumer Price Index (IPCA ). If its price falls, the product contributes to a pullback of the indicator.

In addition, diesel is used as a fuel in land transport, and “it is an input for almost everything that is transported in the country, so the cost of freight can drop”.

However, the professor points out that there is a time before this drop actually reaches the final price of products paid by consumers. Depending on the product, the delay can be up to two months.

Pires also believes that the cut will help reduce inflation, especially by reducing the cost of land transport.

He also recalls that “inflation is falling a lot due to the reduction in the price of energy and fuel, with oil falling and the reduction of ICMS charged for these products”.

The economist says that if the international downward trend in oil continues, “there is room for Petrobras to make further reductions in gasoline and diesel”.

However, the commodity has shown high volatility, and may enter a high sequence during the winter in the Northern Hemisphere, depending on new sanctions against the Russia or cuts in the country’s natural gas supply.

The president of Abicom says that “the market is very volatile, commodities are fluctuating a lot. Oil is already volatile, and diesel is even more so, quite detached from oil, so it’s impossible to predict. It also depends on the behavior of the exchange rate, and the real has appreciated in recent days”.

“It’s hard to predict. It is a time of great instability in the price of oil, and consequently of fuels. There is uncertainty about a possible recession in the United States and in the world, and this sentiment changes week after week, influencing the price of oil”, says Schiozer.

Source: CNN Brasil

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