International Parity Price (PPI) and pressure from shareholders are the main obstacles in the sector, explains Ricardo Hartmann, PhD in engineering and professor at Unila.
Frequent adjustments in fuel prices have caused headaches for various sectors of the economy and directly affected consumers, who are struggling to avoid high inflation.
To understand a little more about the reasons that led to the current scenario, we interviewed Ricardo Hartmann, PhD in Engineering and coordinator of the Mobility and Energy Matrix Research Group at the Federal University for Latin American Integration (UNILA). For the expert, the parity policy used by the state-owned company is the main “villain” in the price increases. According to Ricardo, only a change in this process would help to alleviate the price of fuel in the country. Check out the full interview:
Petrobras announced a new increase in fuel prices this Friday (17). As a result, some gas station owners have already rushed to make the adjustment. When, in fact, should this increase reach the pumps and, consequently, the consumer's pocket?
The fuel leaves the refinery and goes through the distribution system before being loaded onto the trucks that head to the gas stations. This takes time. If the price adjustment at the refinery happened today, the fuel at the gas station in Foz do Iguaçu is still fuel purchased at the old price. This adjustment happens because the gas station owners decide so and should reach the consumer after a new shipment, which depends on the reserves at each gas station. This usually takes between one and three days.
Why does this malicious practice at gas stations happen and how could it be prevented?
This is a practice that unfortunately occurs throughout Brazil and is prevented by inspection actions by both the Procon of each state and the National Petroleum Agency (ANP), which unfortunately has a reduced workforce. This practice is also induced by the PPI [International Parity Price] policy, which was established by the National Energy Policy Council. Petrobras adjusts the price of fuel according to the international market, and this causes more frequent increases, making it more difficult for the consumer and for the inspection agencies themselves to prevent this practice.
How does the PPI work and how do other countries deal with this issue?
The PPI was a political choice by the federal government, which was instituted in 2016 by former president Michel Temer and confirmed by the current government and the current legislature. This policy has been favoring private shareholders. Why? Brazilian oil has an extraction cost of between US$15 and US$20 per barrel. Between 2,5 and 3 million barrels are produced per day, which would be enough to supply the domestic market with gasoline and diesel, but more refineries are needed. In 2016, we were practically 85% self-sufficient in derivatives, and there was no continuity in the expansion of refineries. In another three or four years, we would reach 100% self-sufficiency in refining and there would be no need for international parity.
In practice, Brazil currently produces oil at US$25, but charges domestic consumers as if it were US$100. This is because international investors who own Petrobras shares encourage the PPI policy. The National Energy Policy Council could decide that the price of oil products produced in Brazil would be quoted according to the cost of pre-salt exploration, more or less US$25, plus refining, taxes and a margin to cover the company's investments and profits. As a result, gasoline could be around R$4. This is what happens in Argentina, for example, which has a public company for domestic oil extraction. As a result, fuel there is much cheaper.
With the bill that limits ICMS (Tax on Circulation of Goods and Services) to 17%, is it possible to reduce the price of fuel?
The bill was approved and there has already been another increase induced by the PPI policy. There may be other increases, for example, with the rise of the dollar, because oil is priced in dollars, or if there is an increase in the conflict in Ukraine. This change in the ICMS takes resources away from states and municipalities in important sectors, such as health and education, and may not have any effect on the price of fuel. This step does not solve the problem. What does solve the problem is changing this PPI policy, and that is in the hands of the federal government and the National Energy Policy Council.
In the long term, is it possible to imagine a decrease in fuel prices?
We have oil reserves and refineries. What is needed is political will to confront the private interests of the oil industry. Today, Petrobras shareholders are being favored to the detriment of the population. This policy needs to change and the price of fuel needs to be calculated based on the cost of production, refining, profit and taxes. This would result in gasoline costing around R$4, but this is a long-term discussion.
