With nearly 15 million unemployed and 20 million people suffering from hunger, Brazil is experiencing one of the biggest crises in its history, as a result of the disastrous social and economic policy implemented by the government of Jair Bolsonaro (no party). One of the results of this incompetence is the explosion in the prices of fuel and cooking gas, LPG.
The constant increases originate from the pricing policy adopted by Petrobras’ management since October 2016, by the then president Michel Temer (MDB), based on the Import Parity Price (PPI), and which was aggravated with Bolsonaro, with the sale of refineries and other Petrobras assets.
This piecemeal privatization of Petrobrás has a direct impact on the population’s pocket, not only at gas stations and gas resellers.
The increase in petroleum products is reflected throughout the production chain, also forcing the readjustment of food and other products. The result is soaring inflation.
The Extended National Consumer Price Index (IPCA) – the country’s official inflation – is already 9.68% in the last 12 months. And the situation is even worse for the poorest, since the National Consumer Price Index (INPC), which measures inflation for families with income between 1 and 5 minimum wages, is at 10.42%.
“From January to August, Petrobras’ management readjusted the gasoline by 51% at the company’s refineries. In diesel, the increase is already 40%, the same percentage as the increase in cooking gas. These products have a direct impact on inflation in Brazil, which continues to rise. And expectations are for prices to remain or rise in the coming months, reflecting the impacts of the PPI”, observes economist Cloviomar Cararine, from the Inter-Union Department of Statistics and Socio-Economic Studies, subsection Single Federation of Oil Workers (Dieese/FUP).
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Disaggregated data obtained by Dieese/FUP based on the IPCA show that, in the first eight months of 2021, gasoline increased by 31.09%. In diesel, the accumulated increase was 28.02%. Ethanol also registered unprecedented highs: 62.26% in 12 months, 40.75% in the year, and 4.50% in August.
The deterioration of workers’ income goes even further: bottled gas had a record high of 23.79% in the first eight months of this year, accumulating in 12 months, until August, 31.70%.
The increase in cooking gas was reflected in food and beverages, which increased 13.94% in twelve months, or 4.77% in January/August.
And the situation will get worse. Second article of Folha de São Paulo on September 23, the price of propane, the raw material for cooking gas, rose nearly 15% in the US in one month. And as Petrobras’ management uses international prices to readjust LPG in the domestic market, the arrival of winter in the Northern Hemisphere makes prices soar abroad, which will have an impact on Brazil.
“The main reasons for the increases that are pushing inflation are not being attacked by the government. Petrobras’ management maintains its mistaken policy on the prices of derivatives; food disputes demand with the world market and both sectors (derivatives and food) are following the instability of the dollar. Electricity, which is also weighing on, suffers from climatic problems and lack of water in the reservoirs. The coming months will be of greater price pressure for Brazilian families”, highlights Cararine.
Jair Bolsonaro and his allies constantly attack the governors, trying to blame increases in gasoline, diesel and cooking gas on the Tax on Movement and Goods and Services (ICMS).
“It is one more among many lies invented by Bolsonaro to try to disguise his genocidal political project, which, in addition to denying vaccines, makes the people suffer with unemployment and exploding prices”, assesses the general coordinator of the FUP, Deyvid Bacelar.
“The ICMS percentages charged on gasoline, diesel and cooking gas have been the same for years. Years ago! Now, if Petrobras’ management increases the prices of gasoline, diesel and cooking gas in refineries, it is obvious that the amounts charged by the states also increase. It’s a ripple effect. It is a lie to blame the state governments and the ICMS for the price boom. It all starts with the management of Petrobrás, authorized by the Bolsonaro government to follow the rules of the international market and to increase prices at will. As long as Petrobras’ management does not change the current fuel price policy, nothing will change”, explains Bacelar.
::Petrobras allocates 90% less than announced by Bolsonaro to fund gas to the poorest::
The FUP’s general coordinator still recalls the weight of Petrobras’ piecemeal privatization on the Brazilian consumer.
“Silva e Luna attended the National Congress on September 14 and omitted the sale of the Landulpho Alves (RLAM) refinery, in Bahia, to the Arab fund Mubadala for US$ 1.65 billion, half of the market value, according to a study by the Ineep and surveys made by financial market companies. Contrary to the global trend, Petrobras has already sold practically the entire network of gas pipelines, its participation in Gaspetro, which supplies natural gas to distributors, its renewable energy units, like all wind energy plants, and is disposing of the plants of biofuel”.
Bacelar also criticizes the governance policy of Petrobras’ management. “Silva e Luna said he has a strong corporate governance structure, but he did not mention the fact that the 220,000 monthly salary paid to him, added to the rise in cooking gas and fuel prices and the distribution of dividends to shareholders in record amounts of R$ 41 billion, generate popular indignation”.
fair price is possible
Since February 2021, FUP and its unions have been carrying out actions in which they sell fuel and cooking gas at the price they should be selling. In addition to the financial benefit, the “Fuel Price Fuels” campaign aims to dialogue with the population about the damage caused by the fuel readjustment policy based on the PPI.
The sale of gas at a fair price is a relief for consumers’ pockets, especially for the poorest, who have been feeling the effects of Petrobrás’ fuel readjustment policy – see the INPC of 10.42%.
“There are people using firewood and even alcohol to cook. These readjustments that Petrobras’ management has been applying not only to cooking gas, but also to diesel and gasoline can be avoided. All that is needed is for the company to stop using only oil and dollar prices and also consider national production costs. After all, 90% of the oil products that we consume are produced in Brazil, in Petrobras refineries. And the company uses mostly national oil, which it produces here itself”, explains Bacelar.
Brazil, which has already reached full employment in 2014, suffers from one of the biggest unemployment crises in its history, in which almost 20 million people are starving, there are more than 14 million unemployed and the prices of essential products for survival don’t stop climbing.
What is PPI?
The Import Parity Price (PPI), adopted by Petrobras’ management in October 2016 – therefore, five years ago – is based on oil prices on the international market, on the variation of the dollar in Brazil and on import costs, without consider the national costs of production.
Currently, between 80% and 90% of oil products consumed in Brazil are produced in Petrobras refineries. And mostly Brazilian oil, produced by the company itself, is used in this process. After all, the country has been self-sufficient in oil production since 2006.
However, Petrobras management chooses not to use all of its refining capacity. In recent years, the utilization factor (FUT) of the company’s refineries has been around 75%. This opens up space in the domestic market for fuel importers – who pressure the company to readjust its products based on the international market. And Petrobras’ management, in a submissive way, yields.
It is important to remember that the PPI was responsible for the strike by truck drivers in May 2018, which paralyzed the country and caused the resignation of Pedro Parente as president of the company. Despite having made some changes to minimize the impacts of the PPI, Michel Temer’s management maintained this policy of adjustments.
With the arrival of Jair Bolsonaro as President of the Republic and the appointment of Roberto Castello Branco to preside over Petrobras, the application of the PPI intensified and was aggravated by the sale of several assets of the state-owned company, such as oil and natural gas fields, gas pipelines, transport companies of gas, BR Distribuidora and refineries.
Castello Branco promoted a veritable ‘feirão’ for the country’s largest government-controlled company.
Without caring about the economic and financial sustainability of Petrobrás in the medium and long term, it removed the company from vital economic segments for a large oil company, such as fuel distribution, investments in renewable energy sources, the production of fertilizers and even of crude oil refining.
After ignoring claims about high fuel prices, Castello Branco was fired from Petrobras and replaced by General Joaquim Silva e Luna, who has no experience in the oil and natural gas sector. However, the notorious policy of the PPI, as well as the delivery at a bargain price of the assets of Petrobrás – and of the entire Brazilian population – remain the same.
*The Single Federation of Oil Workers (FUP) was created in 1994, as a result of the historical evolution of the oil union movement in Brazil, since the creation of Petrobrás, in 1953.
**This is an opinion piece. The authors’ view does not necessarily express the newspaper’s editorial line Brazil in fact.
Source: BoF Rio de Janeiro
Edition: Mariana Pitasse