SAO PAULO – It has never been so expensive to fill the tank. The average price of a liter of regular gasoline in Brazil reached R$5.955 last week, according to a survey by the National Agency for Petroleum, Natural Gas and Biofuels (ANP) carried out between the 15th and 21st, but it could be found above R$ 7 in service stations in Acre, Rio de Janeiro and Rio Grande do Sul. The average value in August, R$ 5.90, is the highest in the last 20 years in nominal terms. Since the beginning of 2021, fuel has increased by almost 28%.
One of the main reasons is the price of oil on the international market. The Brent-type barrel – traded in London and used by Petrobras to calculate the price – has increased by almost 40% since the beginning of the year, putting pressure on fossil fuel prices in general.
Petrobras, which supplies the distributors, calculates the price at the refineries based on the oil price and the exchange rate, as the commodity is quoted in dollars. In this sense, the appreciation of the US currency, accumulated at 1.55% in 2021, also forced gasoline to rise. The state-owned company increased the price of fuel nine times this year alone.
After a sharp drop at the beginning of the Covid-19 pandemic, as a result of the global economic slowdown and a dispute between Saudi Arabia and Russia – which flooded the market at the time, forcing prices down – the price of oil returned to rise as economic activities resumed. But if fuel consumption grew, world production did not advance at the same pace.
According to information from the International Energy Agency (IEA), world fuel production was at 92.3 million barrels per day in the second quarter of 2020, while demand was at 84.8 million barrels. In the same period of 2021, demand increased to 96.7 million barrels per day, but production remained at 94.9 million barrels. According to IEA projections, world production should only surpass demand again in the first quarter of 2022.
But there are other factors that can influence the price of oil, such as a resurgence of the pandemic, with the Delta variant, and geopolitical risks, such as regional conflicts. “We have no control over this volatility,” said the director of the Brazilian Center for Energy Infrastructure (CBIE), Pedro Rodrigues.
In the exchange variation, however, Brazil could have more tranquility. The devaluation of the real occurs for external and internal reasons, and among these factors are the uncertainties about the future of the pandemic, the government’s commitment to fiscal responsibility and political instability.
The weight of ethanol
Another item that contributes to the increase in gasoline is the price of ethanol. In Brazil, hydrated ethanol is sold as fuel at service stations and anhydrous ethanol is mixed with gasoline at the rate of 27%. Both are on the rise.
The price of anhydrous ethanol rose 5.18% in the last weekly survey carried out in São Paulo by the Luiz de Queiroz College of Agriculture and the Center for Advanced Studies in Applied Economics (Esalq/Cepea), at the University of São Paulo (USP). In the year, the variation reaches 56.5%.
One of the reasons is the result of the 2021/2022 sugarcane crop, which is below the production of the previous cycle. The latest survey by the National Supply Company (Conab) forecasts a 9.5% reduction in sugarcane harvesting and a 10.8% reduction in the total volume of ethanol.
“During the water crisis, one of the most affected crops is sugarcane. There were large losses from the drought and frosts,” said economist André Braz, from the Brazilian Institute of Economics at the Getulio Vargas Foundation (Ibre-FGV).
Anhydrous ethanol is more profitable for mill owners than hydrous ethanol, so even with the crop failure there was an increase in the production of the former and a reduction in the latter.
“Up to the date of the survey, there was prioritization in the production of anhydrous alcohol – 10.8 billion [de litros], with a growth of 5.9% compared to the previous year, at the expense of hydrous – 18.3 billion, a reduction of 18.5% due to the higher profitability of anhydrous this year”, informs the Conab report.
The average price of hydrated ethanol, sold at gas stations, increased 37% over the year and is at R$ 4.50, according to the ANP. In addition to the reduction in production, the advance in the value of gasoline itself influences pricing.
According to Rodrigues, from the CBIE, hydrated ethanol tends to increase when gasoline rises, in a cycle that feeds back. “Prices at service stations are free. When a competing product goes up, [o dono do posto] it increases the other as well”, he commented. The ANP researches prices, but does not control them.
For the consumer to save on fueling, considering the differences in the performance of cars with the two fuels, the value of hydrated ethanol has to be up to 70% of that of gasoline. If the concern is environmental, however, there is nothing to discuss: biofuel is much less polluting.
The composition of the price of gasoline
According to the ANP, the value of gasoline at gas stations is made up as follows: gasoline producer price (35.6%), which is basically Petrobras; price of anhydrous ethanol (14.8%); federal taxes such as Cide, PIS/Pasep and Cofins (12.6%); state taxes, which is the ICMS (28.1%); and distribution and resale margin (9%). Percentages may vary depending on the period and state of sale.
Taxes are the item with the greatest weight on the cake, especially ICMS, which is statewide. “Governments always look to gasoline as a source of revenue, as in electricity, and not with a view to adequate public policies”, noted Rodrigues. According to Braz, at the moment, however, there is no scope for reducing taxes, as the states are indebted and have little investment capacity.
In the assessment of analysts, there are no short-term alternatives to hold the price of gasoline. In Rodrigues’ view, however, governments can promote initiatives to serve certain segments of the population using Treasury funds, such as Vale Gás, in São Paulo, which transfers money to vulnerable families to buy cooking gas. For Braz, the solutions are long-term, such as the construction of new refineries.
Can the government intervene?
In the past, the government used to intervene in the price of gasoline through Petrobras. In the evaluation of analysts, however, the practice is not recommended. It is worth remembering that the oil company, despite being state-owned, is a publicly-held company, and any interventions could cause damage to other shareholders.
“Whenever the government tried to dissociate the pricing policy from market laws, it created inefficiencies in the sector and in the remuneration of private capital, which hopes to gain profitability. with the damming [de preços], this turns into a loss”, observed Braz.
According to economists, interventions inhibit investments not only in Petrobras, but in the sector as a whole. “They expel investors and someone will have to pay the bill,” Rodrigues declared. An example of this is the low number of refineries in the country (18), compared to the United States, due to “fear of the government”. “There are 160 in the US”, he pointed out.
In February of this year, amid rising prices, President Jair Bolsonaro changed command of Petrobras, announcing through his social networks that General Joaquim Silva e Luna would replace Roberto Castello Branco, who was then president of the state-owned company. This made the company’s shares plummet – it took four months until the company’s shares returned to the level before the change.
Impacts on inflation
Like gasoline, and for similar reasons, the average price of liquefied petroleum gas (LPG) – that of cylinders – increased 21.5% since January, to R$ 94.40 in August. In states like Mato Grosso and Pará, it reaches R$ 130. These are items that play an important role in the Broad Consumer Price Index (IPCA), the official inflation indicator in Brazil, measured by the Brazilian Institute of Geography and Statistics (IBGE) .
In other words, in addition to hurting your pocket when fueling your car or cooking, increases in fuel prices are directly reflected in inflation, which this year, until July, was 4.76%. Gas and gasoline are among the items that most contributed to the index’s advance.
This is because, in addition to the direct impact, there are also indirect effects. Like gasoline and ethanol, the average price of diesel has also risen by almost 25% since January – and most of the country’s freight and collective transport depends on this fuel. Bottom line: it pushes up the cost of goods and mobility.
“The increase in diesel is even more dangerous. Gasoline affects the family budget, but diesel weighs heavily on the flow of products, freight and urban buses”, noted Braz. “It can even make the products from the open market go up”.