In Lula’s Government, Petrobras ends international dependence on fuel prices

Marcela Leiros – From Cenarium Magazine

MANAUS – Petrobras announced on Tuesday, 16, the end of the International Parity Price (IPP) as the criteria base for oil prices in Brazil. This means that the state-run company will no longer set fuel prices, such as gasoline and diesel, for example, according to the dollar and the international market, and will adopt a new policy.

Petrobras said that the decision was made in view of the alternative “more accessible to customers. Despite the change, the adjustments will continue to be made without a defined periodicity, “avoiding the transfer to domestic prices of the volatility of international quotations and exchange rates”.

From now on, Petrobras will adopt a new “commercial strategy”, with two market references: “alternative customer cost” and “marginal value”. The first considers the main supply alternatives, whether suppliers of the same or substitute products. The second is based on the opportunity cost given to the various alternatives for the company, such as production, import and export of a product and the oils used in the refinery.

“With the change, Petrobras has more flexibility to practice competitive prices, taking advantage of its better production and logistics conditions and competing in the market with other players that market fuels in Brazil, such as distributors and importers”, the statement said.

Recently, Petrobras president Jean Paul Prates said the company should not practice the IPP. “If out there the price of oil has decreased, so it has decreased for me also in terms of inputs to the refineries, I have to match that to the price for the final consumer. Now, I don’t necessarily have to be tied to the price of the importer who is my main competitor. On the contrary, import parity is not the price Petrobras should practice”, he said.

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The PPI policy was announced by Petrobras in 2016, based on two factors: the PPI, which included costs such as ship freight, internal transportation costs and port fees – plus a margin to remunerate risks inherent to the operation, such as exchange rate volatility and prices on port stays and profit, plus taxes.