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Petrobras Redefines Fuel Price Policy and Abandons Oil Import Parity Price

Written by Paulo Nogueira

Published on 16/05/2023 at 09:10

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The State Company Is Committed to Making Adjustments Without a Defined Frequency, Aiming to Limit the Impact of International Fluctuations and the Exchange Rate on Domestic Prices.

In a turnaround in pricing policy, Petrobras announced on Tuesday (16) that it will discontinue the practice of pricing parity for oil and its derivatives, such as gasoline and diesel, with the dollar and the global market. Since 2016, the price of these products in the domestic market was directly affected by international fluctuations, without any government interference to ensure lower prices. Now, Petrobras is putting an end to this automated mechanism.

New Commercial Strategy

“Adjustments will continue to be made without an established frequency, limiting the impact of momentary fluctuations in international prices and the exchange rate on domestic prices”, Petrobras reported. The state company’s new commercial strategy will be based on two market references:

The “Customer’s Alternative Cost” as the main value in price setting.
The “Marginal Value for Petrobras“.

The “Customer’s Alternative Cost” takes into account the main supply options, whether of identical products or substitutes. The “Marginal Value”, according to Petrobras, is based on the opportunity cost considering the different alternatives available to the company, including the production, import, and export of the product in question and/or the oils used in refining.

ARTICLE CONTINUES BELOW

Lula Proposes to “Brazlianize” Prices

Since his campaign, current President Luiz Inácio Lula da Silva has suggested the “brazilianization” of fuel prices. In essence, this implies the creation of mechanisms to mitigate the impact of international oil fluctuations on gas station prices.

Maintaining Competitiveness Is a Priority

Jean Paul Prates, president of Petrobras, emphasized that the company will continue to follow international references and maintain internal competitiveness. “We will not lose sales. We will not fail to have the most attractive price for our customers”, he stated.

New Calculation Is Still a Mystery

Despite the reformulation of the pricing policy, Petrobras has not disclosed a clear formula indicating the weighting of each factor in the new calculation. This has generated criticism from industry experts, such as economist Adriano Pires, co-founder and director of the Brazilian Center for Infrastructure (CBIE), who classified Petrobras’s communication as confusing and potentially disruptive to the market.

The lack of a transparent calculation formula, according to Pires, could generate instability among sector players. “This type of announcement has been tumultuating the market. The gas station owner buying gasoline, the distributor, no one is buying or selling. Petrobras itself has stopped selling”, he evaluated.

Challenges Ahead

Although Petrobras’s new commercial strategy promises more flexibility in pricing and the maintenance of competitiveness, the way forward is still uncertain. There are concerns about how the company will balance the volatility of the international market, the exchange rate, and domestic demand, all at the same time.

Still, Petrobras’s decision to abandon oil pricing parity is seen as an important and necessary move for the company’s adaptation to the current market environment. The expectation is that the changes will allow for greater price flexibility, improving the company’s competitiveness and benefiting consumers.

As Petrobras prepares to implement its new pricing policy, all eyes will be on the company and its next steps, waiting to see how this new strategy unfolds in the Brazilian energy landscape.

Petrobras Redefines Fuel Price Policy and Abandons Oil Import Parity Price

The State Company Is Committed to Making Adjustments Without a Defined Frequency, Aiming to Limit the Impact of International Fluctuations and the Exchange Rate on Domestic Prices.

New Commercial Strategy

Lula Proposes to “Brazlianize” Prices

Maintaining Competitiveness Is a Priority

New Calculation Is Still a Mystery

Challenges Ahead

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Petrobras Redefines Fuel Price Policy and Abandons Oil Import Parity Price

The State Company Is Committed to Making Adjustments Without a Defined Frequency, Aiming to Limit the Impact of International Fluctuations and the Exchange Rate on Domestic Prices.

New Commercial Strategy

Lula Proposes to “Brazlianize” Prices

Maintaining Competitiveness Is a Priority

New Calculation Is Still a Mystery

Challenges Ahead

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An entire island in the Pacific wants to surround itself with a colossal barrier against the ocean to try to escape increasingly violent waves and not be swallowed by the sea in the coming decades.

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In the Saudi Arabian desert, the world’s largest green hydrogen plant is 80% complete and will use 4 gigawatts of solar and wind energy to produce 600 tons of clean fuel per day when it opens in 2027.

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