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Petrobras And Fuel’s Price: Privatization Is The Solution?

The opinions expressed in this article are the writer’s own and do not reflect the views of Her Campus.

The privatization of the oil company Petrobras is not a new subject in Brazilian territory, especially in president Jair Bolsonaro’s government. Recently, he returned to defend the company’s privatization in an interview and he also stated that there is great popular support for the sale of the oil company.

In 2016, during Michel Temer’s government, the state company adopted a price policy called Import Parity Price (IPP), where Petrobras sets the internal price of oil derivatives at the international price of oil. It means that if the price of the commodity rises, this increase will be passed on by the company

THIS PRICE POLICY WORKS?

According to the economist and Faculty of Economic Sciences of PUC-Campinas’ professor, Valdir Iusif Dainez, this price policy has problems. “Petrobras was founded exactly in a context, where the fuel’s price was very high, so you were desiring a national petroleum with differentiated prices in the international market”, explains the professor.

Dainez points out that as the price of national oil is indexed to the international market, it is no advantage to produce petroleum since the value is the same as that of international oil.

The fuel’s high price is due to several factors, as the economist explains. The price of oil was already increasing, because the producing countries had reduced their oil production, then the Russia-Ukraine war broke out and the whole situation increased. Furthermore, since the beginning of Bolsonaro’s government, “we have had a very large devaluation of the exchange rate, which increases the price of imported products, including oil”, says Dainez.

But supporters of this policy argue that the pass-through of prices prevents the state-owned company from having losses.

PRIVATIZATION IS THE SOLUTION?

“It is important to remember that part of Petrobras’ distributors has already been privatized”, remembers the economist. In 2019, the Bolsonaro government privatized BR Distribuidora, which makes these distributors import diesel at market prices, as Dainez points out.

The professor explains that there is no reason to privatize Petrobras, “it is an extremely profitable state company, which pays very high dividends to the government”, he points out. “As the government is the majority shareholder, it must take the reins of the company’s management”, he adds.

It is legitimate to privatize a company – argues the professor – when the state-owned company is not offering a quality service at affordable prices. With the oil company’s privatization, “the government wants to take the responsibility for the increase in fuel prices off its shoulders”, says Dainez.

As a possible solution, the economist discusses the possibility of the Federal Government – being Petrobras’ main shareholder – imposing a change in the company’s pricing policy. “In practice, the government has been freezing the price of diesel and gasoline, it has the power to do that”, he adds.

Another alternative would be for the government to invest in alternative fuels, such as alcohol, which is 100% produced in the internal industry. Or, even encourage the purchase of electric cars, as mentioned by Dainez, following the example of Canada, which offers subsidies for the purchase of electric models.

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The article above was edited by Camila Nascimento

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Alessandra Souza

Casper Libero '23

Journalism student at Cásper Líbero (BR). I love writing, listening to music and going out with some friends 🤍
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