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The Association of Independent Refineries Asks the Lula Government for a Revision of the Federal Tax Exemption. The Goal of Refina Brasil Is to Include the Purchase of Oil in the Domestic Market Alongside Diesel Oil and LPG by December 31st of This Year.
The independent fuel refining market in Brazil faces a significant threat. The association of independent refineries, Refina Brasil, alerted the Lula Government about a possible shortfall of R$ 5 billion with the end of the federal tax exemptions, PIS/Cofins, on oil purchases in 2023. The goal is an amendment to Provisional Measure 1157/23 to extend the deadline for oil purchases, as well as LPG and diesel oil.
End of Federal Tax Exemption on Oil Purchases, Announced by the Lula Government, May Cause Billion-Dollar Shortfall in 2023
The independent fuel refineries in the Brazilian market are requesting the Lula Government for a new edition of Provisional Measure 1157/23.
As was the case with diesel oil and LPG, the goal of the Refina Brasil association is to include the purchase of oil in the federal tax exemption until December 31st of this year.
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Evaristo Pinheiro, representative of the newly created Refina Brasil, which brings together the six independent refineries in the country, stated that there could be a shortfall of up to R$ 5 billion in the domestic market throughout 2023.
In March 2022, the Bolsonaro government issued a measure exempting all fuels from federal taxes until the end of its term to curb inflation.
However, the new Lula Government revised the measure, extending the exemption of federal taxes on diesel oil and LPG until the end of December this year. Meanwhile, gasoline, ethanol, Compressed Natural Gas (CNG), Aviation Kerosene (QAV), and oil purchases had their deadlines extended until February 28th.
This decision represents a high risk for the domestic refining market, as it may lead to a fuel supply crisis, in addition to a significant increase in prices.
The independent refineries operate with a low margin and will not be able to sustain the end of the federal tax exemption on oil purchases announced by the Lula Government.
Independent Refineries May Become Hostages of Petrobras in the Domestic Market with the End of Federal Tax Exemption on Oil Purchases, Highlights Pinheiro
Evaristo Pinheiro commented on the current situation of the independent refineries’ participation in the Brazilian market.
They represent only 20% of the country’s consumption capacity, while the majority purchase oil from Petrobras.
“As they are independent and Petrobras controls 80% of the market, these refineries cannot pass on prices (to the gas stations) and will have to reduce the processed load, which will require more imports from Petrobras and consequently, price increases to avoid shortages,” said the representative of Refina Brasil.
According to the association, the ministries of Mines and Energy, the Civil House, and Industry and Commerce have already been approached to discuss the matter, but have yet to receive a response.
The Lula Government’s decision to end the federal tax exemption on oil purchases comes at a time of great volatility in fuel prices in the international market. Now, the independent refineries await a response from the current government regarding the future of the provisional measure.
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