Lagging and escalating fuel prices could weaken tax cuts

The current lag of gasoline and diesel may reduce the effect of the federal government’s idea of ​​zeroing the ICMS (Imposto de Circulação de Mercadorias e Serviços) on diesel and LPG and reducing the ICMS on gasoline to 17%.

The reason is that since the last fuel adjustments, gasoline has already accumulated a lag of 20% and diesel of 14% in relation to the international market, according to importers.

In the last diesel adjustment, the lag was 21%, but the increase only increased the price by 8.8%. There were 50 days of lag until President José Mauro Coelho’s decision to apply the change in value. Gasoline, on the other hand, has been out of date since April 25, having been available for 42 days.

In practice, a liter of gasoline is sold by Petrobras to distributors for 95 cents less than import costs. Already diesel is with a difference of 78 cents.

That is, if the management of the state-owned company decided to apply the adjustment based on the history of the International Parity Price, this could reduce the practical effect of a reduction to 17% or even zero ICMS on fuels, as proposed by the federal government.

On a website launched by Petrobras itself in the second half of May, the state-owned company points out that the ICMS value on gasoline is R$ 1.75 on average, which is equivalent to an average rate of 24.1%.

If the tax were reduced to 17% as proposed by the government, gasoline would have a discount of 51 cents, practically half the difference with the international market. This means that if Petrobras decided to increase the amount to cover half of the difference, the government’s effort would be completely nullified.

In the case of diesel, Petrobras points to an average ICMS of 11.6%, which is equivalent to 82 cents of the price. It turns out that the lag is already at 78 cents, even after Petrobras’ decision to raise the price of fuel on May 9.

To make this equation worse, experts consulted by the CNN point out that there is still room for an increase in the prices of these fuels in the coming months. In the case of gasoline, the rise in the barrel of oil, the war in Ukraine, the exchange rate and the summer in the northern hemisphere could put even more pressure on the price.

Diesel, on the other hand, has an even more delicate situation, as there are low reserves in the main consumers and exporters, the hurricane season that can stop refineries and scheduled maintenance in Brazilian refineries.

There is still another factor that complicates this equation: the Ministry of Mines and Energy has not yet sent the list of names it wants on the Petrobras Board of Directors. Until that happens, the background check process is not started and the release for the convening of the meeting that will change the company’s command is not scheduled.

The current president, José Mauro Coelho, has already signaled and demonstrated that he must continue to follow international parity. His replacement candidate, Caio Mario Paes de Andrade, has not yet revealed whether he would promote changes in Petrobras’ pricing policy.

See below the calculations of change of values ​​made by CNN based on official data from Abicom, ANP and Petrobras. The consultation took place on June 6, the date of the announcement by the federal government.

Gasoline

Average value today (considering average ICMS of 24.1%): BRL 7.25

Amount with ICMS at 17%: BRL 6.74

51 cents discount
Current lag of 95 cents

Diesel

Average value today (considering average ICMS of 11.6%): BRL 7.05

Amount with ICMS zeroed: BRL 6.23

82 cents discount
Current lag of 78 cents