With instability in the world oil market due to the war in Ukraine, Bento Albuquerque discusses the request of the United States to Brazil and other measures taken in the country

In a meeting on the world oil scenario with the minister of Brazil, a representative of the United States requests an increase in production

Due to the war in Ukraine, the global market has been very unstable, the main reason being the skyrocketing price of a barrel of oil. In this sense, the United States even asked Brazil to increase its production. Jennifer Granholm, energy secretary of the US government, made the request to Bento Albuquerque, Minister of Mines and Energy, during a videoconference last Thursday, March 10th.

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According to the portal Market, the following day, the Brazilian minister stated that the meeting with the US representative was useful to discuss the “international situation”, which has been fluctuating since the beginning of the conflict in Europe. Much of the conversation was to discuss the urgent need to expand oil production in the world.

“Countries that have stocks, such as the United States, Japan, India and others, are releasing them. But there also has to be an effort to increase production. She [Jennifer Granholm] asked me if Brazil could be part of this effort, and I said 'of course it can'. We are already increasing production, while most OECD countries have reduced it. We have increased our production in the last three years”, said Albuquerque.

The Minister of Mines and Energy informed that members of the Organization for Economic Cooperation and Development (OECD) will make 60 million cubic meters of oil available over the next two months. According to him, the measure aims to avoid instability in oil prices on the global market.

He recognized that the great “imbalance” between supply and demand, aggravated by the conflict between Russia and Ukraine, could overcome the problem of rising values ​​and cause a lack of supply to the markets. “Perhaps there is not enough diesel to meet the demand of all countries”, he concluded. Albuquerque also explained that diesel oil reserves in the US are 20% lower, as well as stocks in Middle Eastern countries, which were also affected, with a 40% drop in fuel reserves.

Furthermore, the minister said that, here in Brazil, storage is supervised by the National Petroleum Agency (ANP). According to him, the reserves need to be maintained at higher levels as the stock tanks are further away from the refineries.

Risk of oil shortages and rise in fuel prices

The concern about oil shortages was responsible for the creation of a monitoring committee by the Government, made up of government agencies, in order to monitor the scenario every day.

Regarding the increase in fuel prices, Albuquerque stated that this is not an exclusive concern of the country, since the disparity between supply and demand did not start with the Ukrainian War, it was only intensified.

“In the world's economic recovery in 2021, demand began to increase. It turns out that the offer does not recover immediately. The increase in oil and gas production takes a certain amount of time, in addition to the fact that investments in these sectors have been reduced”, he explained. The minister also emphasized that Brazil was the only country to add 17% to the value of oil and 22% to that of gas.

Brazil is not yet able to process the oil extracted from the fields, therefore, it needs to import derivatives to supply the domestic market. According to Albuquerque, the country is heavily dependent on foreign products, considering that approximately 30% of the diesel and LPG consumed by Brazilians comes from abroad.

As for the measures to control the rise in fuel prices, the minister said that some of them need time to present results, such as the price stabilization fund. “Funds are not born overnight. Inventories are also not established that quickly”, he concluded.