1. Home
  2. / Economy
  3. / Petrobras redefines Fuel Price Policy and abandons the Oil Import Parity Price
reading time 3 min read

Petrobras redefines Fuel Price Policy and abandons the Oil Import Parity Price

Written by Paulo Nogueira
Published 16/05/2023 às 09:10
Updated 27/05/2023 às 07:15
PPI Petrobras Lula Jean Prates import parity policy

The state-owned company undertakes to carry out adjustments without a defined frequency, seeking to limit the impact of international and exchange rate fluctuations on domestic prices.

In a turnaround in its pricing policy, Petrobras announced this Tuesday (16) that it will discontinue the practice of parity of oil prices, as well as 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 has been directly affected by international fluctuations, without any government interference to guarantee lower prices. Now, Petrobras is putting an end to this automated mechanism.

New Commercial Strategy

"Adjustments will continue to be carried out without an established frequency, limiting the impact of momentary fluctuations in international quotations and the exchange rate on domestic prices", informed Petrobras. The new commercial strategy of the state-owned company will be based on two market references:

  1. The "customer alternative cost” as the main value in the definition of prices.
  2. The "marginal value for Petrobras".

The “customer alternative cost” takes into account the main supply options, either 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.

With the new approach, Petrobras gains more flexibility to establish competitive prices, taking advantage of its superior production and logistics conditions and competing with other players in the fuel market in Brazil, such as distributors and importers.

Lula Proposes “Abrasileirar” Prices

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

Keeping Competitive is a Priority

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

New Calculus Is Still a Mystery

Despite the reformulation of the price policy, Petrobras has not disclosed a clear formula that indicates the weighting of each factor in the new calculation. This generated criticism from industry experts, such as economist Adriano Pires, founding partner and director of the Brazilian Center for Infrastructure (CBIE), who classified Petrobras' communication as confusing and potentially disruptive for the market.

The lack of a transparent calculation formula, according to Pires, could generate instability among the players in the sector. “This type of announcement that has been made is disrupting the market. The station owner who buys gasoline, the distributor, nobody is buying or selling. Petrobras itself stops selling”, he evaluated.

Challenges Ahead

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

Even so, Petrobras' decision to abandon oil price 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 will play out in the Brazilian energy landscape.

Paulo Nogueira

With a technical background, I worked in the offshore oil and gas market for a few years. Today, my team and I are dedicated to bringing information from the Brazilian energy sector and the world, always with credible and up-to-date sources.

Share across apps