Lula’s Government Transition Team Aims to Create Fuel Price Stabilization Fund and Halt Petrobras Asset Privatization

The Transition Team Aims to Act Strongly in the Mines and Energy Sector to Stabilize Fuel Prices and Expand Refining in Brazil. The Paralysis of Privatization Projects of Petrobras Assets Is Also Foreseen for the Lula Government.

The future of the Brazilian oil and gas market can bring great benefits to end consumers. The transition team of the Lula Government is studying the creation of a price stabilization fund for fuels in the country. The creation of a refining expansion program and the halt of privatization of Petrobras assets are also planned, along with a review of the agreements that allowed disinvestment in Brazilian refineries.

Lula Government Foresees Stabilization of Fuel Prices, Expansion of Refining Programs, and Halt of Privatization of Petrobras Refineries

The projections of the Lula Government for the first year of its term in 2023 are quite positive. 

This is because the transition team of the government conducted an analysis of the Mines and Energy sector and has some initiatives underway for the coming year. Among them is the creation of a price stabilization fund for fuels in Brazil.

The team’s report, obtained by Globo, also forecasts an expansion in programs to incentivize fuel refining in Brazil, as well as the halt of privatization projects for Petrobras assets.

The review of the agreement with the Administrative Council for Economic Defense (Cade) that mandated the sale of refineries is also anticipated as one of the initiatives to be adopted soon by the Lula Government.

Based on the New Strategic Plan, the document from the transition team recommends that a state policy for expanding refining in the country be developed.

“The increased dependence on imports of derivatives has heightened Brazil’s external vulnerability to meet domestic demand in recent years. This is due, on one hand, to Petrobras’s current refining policy, which has allowed the entry of importers, and on the other, to the policy imposed by Cade to sell Petrobras refineries,” the report states.

According to the Lula Government’s transition team, it is possible, in just 90 days, to develop a fuel price stabilization fund by containing the impacts caused by sudden increases in the price of crude oil.

Strategic Plan Could Benefit Fuel Price Decline With Expansion of National Refining Capacity

Even being one of the world leaders in the oil and natural gas segment, Brazil still suffers from low fuel refining capacity.

Currently, Brazil imports about 30% of the diesel oil consumed in the country and around 15% of gasoline, figures that could be significantly reduced with the necessary incentives for refining.

The increase in the country’s refining capacity has been a policy that was attempted to be implemented at Petrobras during Workers’ Party governments. However, investments ultimately did not occur as expected and became targets of Operation Lava Jato.

The expansion of fuel refining projects in Brazil could significantly contribute to a reduction in final prices passed on to consumers.

“Whether through new legislation or regulation, the government must ensure the necessary tools to act in cases of extreme fuel price fluctuations. This is a matter of strong political sensitivity, whose prevention can represent more room for maneuver for the government in times of crisis,” adds the report from the Lula Government’s transition team.