New fuel policy in Brazil to ease prices at the pump, space out adjustments
SAO PAULO/RIO DE JANEIRO, (Reuters) -
Brazilian state oil company Petrobras approved a new fuel pricing policy for gasoline and diesel that will sharply lower costs for motorists, it announced yesterday, ditching a more market-based policy in favor of greater flexibility to smooth price swings.
President Luiz Inacio Lula da Silva celebrated the new policy for Brazil's millions of motorists in a post on social media later yesterday, declaring it "a victory for the people."
The new pricing system scraps a socalled fuel import parity policy that more closely aligned prices at the pump with the oil market and exchange rates. Lula, as the leftist leader is known, had promised to change that to make fuel cheaper.
Under the new Petrobras pricing strategy, gasoline and diesel prices will fall nearly 13% starting on Wednesday, while prices for liquefied petroleum gas (LPG), used widely for heating and cooking, will drop more than 21%, according to a company filing.
Even so, Petrobras PETR4.SA shares rose as much as 5% after the announcement before ending up 2.5%, making it one of the day's top gainers on Brazil's main stock index .BVSP.
In a research note, JPMorgan JPM.N described the reworked pricing policy as "more friendly than investors expected."
A company source touted the ability to space out future price adjustments over a longer period, with raises or further reductions most likely coming annually or twice a year.
The source, who spoke to Reuters on condition of anonymity, said Petrobras executives believe longer periods without adjustments will not cause losses, because market downturns and profitable stretches should even out over time.
Chief Executive Jean Paul Prates, tapped by Lula to lead Petrobras in January, told CNN Brasil the company will still adjust prices based on market factors. But he also emphasized price tweaks will be rolled out more slowly, compared to especially volatile swings under the old policy in 2021 and 2022.