Seoul Gazette - Brazil's Petrobras hikes prices, ignoring Bolsonaro

Petrobras said it would raise the price of gasoline from its refineries by 18.8 percent and diesel by 24.9 percent from Friday, citing the "worldwide surge in the prices of oil and oil derivatives as a result of the war between Russia and Ukraine."

The company said the increase was in line with those by other fuel suppliers, and emphasized that it had not raised prices in nearly two months.

But the move will likely irk Bolsonaro, who regularly criticizes Petrobras for high prices. Surging inflation in Brazil, driven in part by energy costs, are a particularly weak point for the president as he gears up to seek reelection in October.

His popularity has fallen sharply as inflation has surged to an annual rate of 10.38 percent.

Bolsonaro's fuel-fueled problems may now get worse.

A key leader of Brazil's powerful truckers' associations, Wanderlei "Dedeco" Alves, threatened a repeat of strikes that devastated the country in 2018, causing widespread shortages.

"Independent truckers and transport companies need to come together and paralyze the country," he told Brazilian media.

"No one's going to be able to survive this."

Truckers have been a bastion of support for Bolsonaro, and he is keen to keep them on his side heading into a tough reelection battle, likely against leftist ex-president Luiz Inacio Lula da Silva.

- 'Large fiscal cost' -

Fuel price increases also look set to hit households hard. Petrobras announced the price of cooking gas would increase 16.1 percent.

Bolsonaro is pushing for Congress to pass legislation to bring fuel prices down, though experts say the short-term impact would be minimal.

He is also reportedly looking at decreeing emergency subsidies to lower prices.

Both measures are unpopular with fiscal conservatives.

A first bill to create a fuel-price stabilization fund passed the Senate Thursday by a vote of 61 to eight, and will now go to the lower house.

The bill would use Petrobras dividends paid to the government and several other funding sources to periodically subsidize gasoline, diesel and cooking gas prices, smoothing over market volatility.

It would also double the number of low-income families eligible for cooking gas subsidies to 11 million, and pay fuel subsidies of 300 reais ($60) a month to taxi and ride-hail drivers.

But subsidizing fuel would have a "large fiscal cost," said consulting firm Eurasia Group.

"In 2018, it cost 9.5 billion reais to cut diesel prices -- excluding gasoline -- by just 0.30 reais. A similar proposal in a context of soaring international prices due to the Ukraine war could cost many times more, widening Brazil's budget deficit," it said.

- Stock roller-coaster -

Bolsonaro has a history of attacking Petrobras's prices, which have floated in line with the international market since a 2016 policy overhaul.

He said Monday the company's policy of parity with international prices "cannot continue."

Petrobras shares dove more than seven percent following the comment.

That echoed a stock plunge of more than 20 percent just over a year ago, when Bolsonaro changed Petrobras's chief executive after saying the company should not be constantly "surprising people" with price increases.

Petrobras shares responded positively to the new price hike, gaining 3.9 percent in afternoon trading on the Sao Paulo stock exchange.

But investors fear political pressure over fuel prices could soon hurt the company, and Latin America's biggest economy more broadly.

The international oil market has been rocked by volatility since Russia invaded Ukraine two weeks ago.

The Brent crude price hit a peak of $139 a barrel Monday, a 14-year high, before returning to around $116 Thursday.

P. O'Kelly--BTZ