Petrobras warned government of legal liability for interference

Petrobras warned the government this week about the risk of the Union being held legally responsible if it interferes in the state-owned company’s pricing policy.

The warning was made within a 27-page document sent by the president of Petrobras, José Mauro Coelho, to the Civil House, the Ministry of Mines and Energy and the National Petroleum Agency on Wednesday (25th) attached to the letter in which Coelho warns about the risk of shortages in the second half.

In it, it is written that “Petrobras and União would be held responsible for prices misaligned with market prices, without complying with the conditions established by law”. It then states that “if Petrobras does not practice market prices, its administrators will commit illegalities”, that “the controller (União) can also be accused of interference and legally responsible for it” and that “the only way for Petrobras not to practicing market prices would be through an agreement and reimbursement to the company, which, in practice, constitutes a subsidy with resources from the National Treasury”.

In the document, the state-owned company also says that “international experiences show that the State has the conditions and legitimacy to propose programs aimed at the final consumer without interfering in the markets”.

Are they:

1. “Targeted benefit: Direct transfer to stakeholders (beneficiaries of Brazil aid, gas vouchers, self-employed truck drivers, app drivers, etc.) is cheaper and more efficient;
2. Broad benefit via market agents: Subsidy already applied without questioning in 2018;
3. Fuel charge clause for freight: Copy of the American and Canadian mechanism (fuel surcharge) provided for by law that requires freight contracts to have a fuel cost pass-through clause, so as not to burden the truck driver.”

The document also cites specific experiences made by other countries to try to contain fuel prices. Mentioned are:

• “Energy Tax Reduction – France, Italy, Spain, Norway, South Korea, Netherlands, Nigeria and India
• Subsidies for the population – Germany, France, UK, Italy, Spain, Greece, Japan and Denmark
• Legal provision of automatic adjustment in freight contracts for fuel increases – USA and Canada
• Country Strategic Reserve Release – US, Japan and South Korea and 22 more
  member countries of the IEA (International Energy Agency)
• Increase in production of substitute fuel: China and India (Coal)
• Energy Rationing – China
• Temporary closure of factories – China”.

When contacted, Petrobras and the Ministry of Mines and Energy declined to comment.