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Petrobras keeps fuel prices under global rates as election nears

The price of gasoline and diesel sold to distributors by Brazilian oil and gas giant Petrobras has been below international benchmarks for two weeks now. But with the second round of presidential elections just around the corner, chances are that prices will remain outdated until after the country decides on its next head of state on October 30.

According to data from the Abicom fuel importers association on Wednesday, the prices of gasoline and diesel sold in the country were, respectively, 5 and 12 percent lower than international rates. Gasoline has been cheaper than global prices since October 4; diesel since October 5.

According to the association, Petrobras’ rates are still below global parity even “with the small devaluation in the reference prices of diesel oil and gasoline in the international market” at the end of Tuesday.

With one eye on his re-election campaign, President Jair Bolsonaro has pressured Petrobras to lower energy prices for months — and changed the company CEO three times in just over a year until that started to happen.

Since Caio Paes de Andrade took the role at the end of June, the company has taken advantage of the drop in international oil prices and made four successive cuts to gasoline and another three to diesel. In addition, it also made consecutive reductions in rates on oil derivatives adjusted monthly, including aviation kerosene.

The successive cuts, along with the government measure to cap state taxes on energy and transport, led to Brazil posting deflation for three months in a row. Mr. Bolsonaro hopes that falling fuel prices will give him just enough of a boost to win the election’s second round.

However, the scenario is different now. The price of oil on the international market has been on the rise since the beginning of October due to the announcement of the OPEC Plus energy cartel’s first large production cut in over two years.

The price of a barrel of Brent oil — which in mid-September was traded below USD 84 — rose to USD 98 in early October and was trading at USD 94 at around 12 pm this Thursday.

With global prices surging again, Petrobras will have two unappealing choices: taking losses by holding at current or lower levels, which seems to be the path prices taken, or potentially harming Mr. Bolsonaro’s re-election bid by hiking fuel prices.

Meanwhile, Acelen, owner of the Bahia refinery that was purchased from Petrobras, has already made two price adjustments in the last two weeks. Acelen is the only large private company operating in refining in the country.

According to the company, on October 8, the average price of gasoline and diesel for distributors rose by 9.7 and 11.3 percent, respectively. Then, on October 15, another bump: gasoline rose 2 percent and diesel, 8.9 percent.

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