Federal tax on the price of gasoline has been fixed for two years, but ICMS, which is regulated by governors, is almost double what it was in early January

Gasoline prices in Brazil suffer unbridled shots even with the federal tax being fixed for years. President Jair Bolsonaro, in conversation with supporters at the Palácio da Alvorada, declared that gasoline in Brazil is “cheap”, since fuel “costs R$ 1,95 at the refinery”. After all, how is it possible for Brazilians to pay so much for this fuel?

Read also

• Operators, drivers, bricklayers and other professionals called URGENTLY for job openings in civil construction works with the right to accommodation and more benefits
• Fundação Getúlio Vargas is offering 130 free online courses with certificates in the areas of humanities, technology and exact sciences
• Company offers more than 100 URGENT job vacancies to work from home office with competitive salary
• Oil evaporates under strong pressure from sellers, reaching US$ 66 a barrel and putting pressure on Petrobras to lower gasoline prices, which suffered yet another increase on August 12
• Direct sales from ethanol plants to gas stations generate benefits for consumers who will benefit from low prices and quality

Federal tax has been fixed for years but does not prevent increases in gasoline prices

“Gas is cheap. No, it's cheap… It costs R$1,95 at the refinery. Until you reach the tip, there…”, said the chief executive. On the other hand, at the stations, the last weekly average of the liquid price brought by the National Petroleum Agency (ANP) was R$ 5,866.

“You can see, the federal gas tax exists. It's called PIS-Cofins. It's the same fixed amount since I took over. For two and a half years I did not raise anything. Now, ICMS is almost double what it was at the beginning of January. ICMS is for the governors. I'm not... I'm subject to criticism, no problem, now, let's rightly criticize”, said the president in response to criticism of high fuel prices.

After the 3,3% readjustment made by Petrobras last week, the price of gasoline leaving refineries rose from R$ 2,69 to R$ 2,78. The oil company takes into account the price of 73% of a liter of gasoline, since in Brazil alcohol is added to the fuel before it is offered for sale.

For a better understanding, a liter of gasoline that goes into the consumer's tank is composed of 73% gasoline and 27% alcohol. In other words, Petrobras is responsible for R$ 1,97 of the cost of a liter of gasoline that is sold at gas stations.

According to the state-owned company, the increase in the average price of gasoline follows the increase in international price levels. They serve as a way to ensure that the market does not suffer from the risk of a shortage crisis.

But in the end, the consumer is the one who pays the bill, since other issues must be considered, such as state taxes, mandatory addition of anhydrous ethanol and biodiesel, in addition to the margin charged for distribution and resale.

Petrobras is pressured to lower the price of gasoline with the drop in the value of oil and ethanol gains strength with parity above 70% with the competing fuel

Oil prices evaporated below $66 a barrel on Thursday, their lowest level since May, weighed down by concerns about weaker demand from rising COVID-19 cases, a stronger U.S. dollar and a Surprising increase in US gasoline inventories USA. In Brazil, pressure Petrobras to lower the price of gasoline.

In this circumstance, the market's expectations of a reduction in gasoline prices fall on Petrobras, after the 3,3% increase on August 12th, and turn on the alert for ethanol.

Even if today's drop may be punctual, the fall is strong to return above US$ 70 a barrel in the next sessions, not least because the alert with the advance of Covid should continue to give space for the stress of speculators with derivatives.

Hydrated ethanol came from two strong rises in the plants in the last two weeks and was already above 70% parity with the competing fuel.

Direct sales from ethanol plants to gas stations generate benefits for consumers, who will enjoy low prices and quality

The provisional measure approved last week by the Government, which guarantees the direct sale of ethanol from plants to gas stations, can generate benefits for the consumer. This statement was made by Alexande Andrade Lima, president of the Federation of Cane Planters in Brazil (Feplana).

According to Lima, “The expectation is that the price of ethanol will come down, mainly in industrial units that are close to large consumer centers”. He also claims that he guarantees the quality of the biofuel that will leave the plant straight to the service stations.

“The sector is well supervised by the ANP. There is no chance of losing quality at the station pumps, as there will be information from the plant that made the product available and this will guarantee quality. The sector is very responsible when it comes to the origin of the product”, he points out.