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Specialist in oil and derivatives regulation and market that the most impacting areas are refineries, the PPI issue and the decrease in dividends
Most likely you, reader, remember the movie with Bill Murray, called Groundhog Day; film in which your character is trapped in a temporal trap that makes him relive the same day over and over again. This is the current economic scenario when we talk about the oil and derivatives market in Brazil.
Putting partisanship and ideological biases aside, and if you carry out a cold analysis of the market's behavior, clearly the behavior shown since the announcement of the results for president, confirming Lula's return to central power, is one of agitation and uncertainty about the future that presents in an extremely close horizon. At least that is what has been noticed when observing the movements of the oil markets, especially those related to Petrobras.
Degree of uncertainties regarding Petrobras
The high degree of uncertainty about the future of this specific segment is supported by past occurrences in other PT governments in relation to their scandals, and which has an impact on Petrobras shares, which has registered, since the end of last week, an accumulated loss of at least minus 10.00% in the value of its shares (PETR3, PETR4) since the confirmation of the victory of the former President of the Republic.
- Shell Prelude FLNG: a maior usina flutuante de gás natural do mundo, produz 3,6 milhões de toneladas de GNL por ano
- New pre-salt oil discovery: Petrobras finds hydrocarbons in the Aram block
- There have never been as many accidents involving oil exploration in the Brazilian sea as there are now
- US blocks Chevron in Venezuela and Brazilian oil companies can profit from heavy oil
As everything indicates, the future government already has the possible name to assume the position of president of the state-owned company and for that purpose it is already sounding out the name of Jean Paul Prates, former substitute for Fátima Bezerra and current senator for Rio Grande do Norte, for this chair. Jean Paul Prates is a little known figure in Southeast Brazil, but well known in the state of Rio Grande do Norte, where he has a long career as a consultant in the areas of energy and oil, including holding positions of trust, both in the ANP and in Potiguar secretariats .
Main concerns of the Brazilian oil market
But what worries the market at this moment does not refer to the technical capacity of its potential “future” president, but rather, the interventionist thinking that accompanies the party that intends to nominate him as president. This thought has already been presented to the market, albeit in a shy way. Among his possible actions as the head of the state-owned company, the most impactful ones can be listed, and that perhaps put the market with a feeling of living the plot of the film with Bill Muray. Are they:
- “Balanced” repurchase of privatized refineries;
- Upgrade and expansion of expanding refineries;
- Exchange the PPI for the regional market price;
- Decrease dividends to invest more;
It is worth mentioning that the state-owned company's pricing policies are based on marketing practices aimed at supplying the market by balancing prices on a “pari pasu” basis with the costs involved in importing fuel, especially diesel oil. Because unlike what is always claimed by politicians, Brazil, due to the deficiency in the productive capacity of its refineries, cannot refine all the oil it produces, and, therefore, imports about 60.00% of all diesel oil consumed in the country. country.
In this way, by revoking the PPI rule and making prices equivalent regionally, it can demonstrate the practice of interventionism before the market. And so the golden rule of the market will be applied, making the competition unattractive given its low profitability or opportunity to gain. And, most likely, it will result in a shortage of products on the market, reflecting in the future on prices that will be pressured to rise because there will be high demand and low supply.
Another negative effect of this type of management in relation to the internal policies of the state-owned company, without a doubt, can have harmful effects, mainly in those related to the company's market positioning and valuation. Although BR is treated as a state-owned company, it is actually a mixed economy company that owns shares on the main stock exchanges in the world and therefore its investors aim at profitability.
Obviously, upon learning that its main shareholder and controller intends to reduce its profitability in order to maintain its populist policies, naturally its shares may lose value, and, consequently, its actions would become uninteresting.
For some, these actions were surprising, while for others, they are totally predictable actions. We will wait for the unfolding of things with great caution.
*Antonio Ticianeli is a chemical engineer, specialist in oil and derivatives regulation and market (This article does not necessarily represent the opinion of Click Petróleo e Gás)
