Diesel Prices Rose 67.88% in Six Months, Carriers Can’t Sustain Outdated Prices After Petrobras Adjustments. Fuel Accounts for Up to 50% of Final Product Costs!

According to the Union of Cargo Transport Companies of São Paulo and Region (SETCESP), the price of diesel has increased by at least 68% in six months in the state of São Paulo (SP). The impacts on logistics and transport promise to be significant after the 15% increase by Petrobras, announced last week on June 17.

The union claims that up to 50% of product prices are related to the cost of freight and, consequently, are linked to fuel prices. According to the institution, the increases made by the state-owned company make no sense, given that the dollar has remained stable in recent days. On Thursday, June 23, the U.S. dollar closed at R$ 5.24.

Petrobras Claims That the Price of Diesel Was Outdated for the Market

Petrobras argues that diesel prices are outdated for the market and that if there hadn’t been a new adjustment this June, there would be a risk of shortages due to excessive external demand.

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Following the announcement of the increase, the president of the state-owned company, Marcos, declared that he would be resigning from his position. He has faced harsh criticism from Jair Bolsonaro and Arthur Lira, the President of the Chamber, regarding the legitimacy of his candidacy. The announcement about the resignation occurred on Monday, June 20, after the negative media fallout.

The national average price of diesel is R$ 6.88, according to the union during a press conference. The price of gasoline is even higher, at R$ 7 in at least twenty states. In Santa Catarina (SC), it is already being negotiated at over R$ 8.5 and could reach R$ 10 at the pumps – so much so that gas stations have been authorized, since 2021, to adjust the pumps to show two digits.

Transport Companies Claim That Freight Prices Increased After the New Hike So They Don’t Fall Behind

Numerous transport companies have already announced their intention to raise freight prices as a way to ensure they do not suffer losses in logistics due to diesel instability. According to analysts, there is no longer a way to avoid passing these increases on to consumers, given that the market is absorbing substantial volatility from Brent crude.

The rise in oil prices in 2022 has several reasons. However, one of the main ones is the ongoing war between Russia and Ukraine. The United States has imposed sanctions against Russia, preventing partner countries from purchasing oil. Consequently, the export numbers for other countries have increased due to higher demand while the Russians are left with unsold stocks. Prices skyrocketed to the point where they jeopardized inflation in the U.S. Joe Biden, in an attempt to alleviate his decision and not harm Americans, discussed the possibility of resuming oil purchases from Venezuela. The European Union is also discussing this possibility as a way for the Venezuelans to address their external debt.

It is not only Brent that influences fuel prices in Brazil, but also the dollar price, which has again been quoted above R$ 5 even with the constant increases from the Ministry of Economy regarding the Selic rate. The Selic is the rate used to determine basic interest rates in the country and, thus, control inflation in times of crisis.