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Financial News: BRAZIL: Petrobras Lowers Diesel Oil Prices In Response

BRAZIL: Petrobras Lowers Diesel Oil Prices In Response To Protests

05/24/2018 - 16:13:00 (RTTNews)

(RTTNews) - The Brazilian state-owned oil company Petrobras lowered diesel oil prices by 10% and will keep them unchanged for 15 days, in an attempt to give time to the government to end a truck driver strike that started to bite the country's economic activity.

Petrobras adjusts fuel prices almost daily, based on oil prices abroad and foreign exchange rates. With a stronger dollar and the recent rally in oil prices, diesel oil became much more expensive this month, leading truck drivers in Brazil to block roads and refuse to deliver cargoes in protest.

The Brazilian government is trying to defuse the situation by bringing down one of the federal taxes on diesel oil, but first, it needs the Senate to end a payroll tax relief. In the meantime, the pressure is building for Petrobras to change its price rules.

Traders believe that any change to Petrobras pricing policy would be detrimental to the state-owned oil company results, and that led to a decline in the company's share price recently.

Wednesday night, Petrobras' president, Pedro Parente, said during a press conference that the decision to lower diesel oil prices was taken unanimously by the board of directors and would mean a R$ 350 million reduction in the company's revenue.

He also added that the Brazilian federal government, which owns a majority stake in the company, did not ask for the reduction.

Meanwhile, truck drivers released a statement saying that they will only end the demonstrations against high diesel oil prices after the government officially lowers taxes on the fuel.

Currently, the federal government proposes to zero the Cide-Combustiveis tax, which is equivalent to R$ 50 per cubic meter of diesel oil sold - ou R$ 0.05 per liter.

Last year, the Brazilian government raised R$ 5.790 billion with the Cide-Combustiveis. The Brazilian government expects that the end of the payroll tax relief would create an extra revenue of R$ 6 billion to offset that revenue loss, but still requires Senate approval to move forward with the proposal.

Truck drivers, however, are asking the Brazilian government also to cut the PIS/Cofins taxes on fuels, which represent 10% of the price of diesel oil to consumers - versus 1% of Cide-Combust?veis. In 2017, the federal government obtained a R$ 28.59 billion revenue from PIS/Cofins tax on fuels alone.

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