Gasoline increase: see the hidden inflation of products – 06/19/2022 – Market

The increase of 5.18% in the liter of gasoline and 14.26% in the value of diesel does not only impact vehicle owners. Important sectors of the economy should pass on the increase in fuel prices to their products in the coming months.

Prices in crucial areas for the daily life of Brazilians such as transportation, food, clothing and civil construction are expected to rise, aggravating the inflationary pressure of recent months.

The average price of gasoline sales to distributors will rise from R$3.86 to R$4.06 per liter. For diesel, Petrobras’ average sales price will rise from R$4.91 to R$5.61 per liter.

The amount charged at service stations depends on taxes and the profit margins of distributors and resellers. “What will basically happen is that people will have a more expensive life, because it will be more expensive to travel”, says Juliana Inhaz, a professor at Insper.

Simão Silber, professor of economics at USP (University of São Paulo) and researcher at Fipe (Fundação Instituto de Pesquisas Econômicas), evaluates that “today, not only in Brazil, there has been a return to a phenomenon that occurred in the 1970s that became known as ‘stagflation’: higher inflation and lower output with rising costs”.

The rise in world oil is largely attributed to the War in Ukraine. Measures such as the US and EU sanctions against oil and gas exported by Russia tend to reduce the quantity of these products on the international market and increase prices. Russia is the second largest producer and exporter of oil in the world.

Petrobras imports oil and oil products and passes adjustments on account of the Import Parity Price policy, adopted in 2016. The increase in fuels has a limited impact on the IPCA (National Broad Consumer Price Index), a measure used to monitor inflation trends for the consumer, but it has a significant influence on the IPA (Broad Producer Price Index), which registers variations in agricultural and industrial products before reaching the final point.

See below how the readjustments for the distributors can translate into increases in four sectors of the daily lives of Brazilians.

transport

The most direct effect occurs, of course, on the prices of road freight, city and interstate bus fares, plane tickets and travel in transportation apps — in addition to the amount spent by passenger car drivers to fill up their tanks.

“The values ​​will be readjusted and should come with a relatively salty readjustment. It starts there”, says Inhaz, from Insper. Silber, from USP and Fipe, says that, even if the values ​​of bus tickets, for example, are not increased by municipal regulation, the impact comes.

“We will be paying because the city will have to subsidize urban transport, put more money in this sector instead of other areas or activities”, he analyzes.

Food

“The cost of everything we consume that requires travel will also increase. We are, for example, talking about food. It will be more expensive to distribute, send food from one place to another. the cost for the product to reach the worker’s table”, says Inhaz.

“The food sector is very sensitive to these fuel price increases.”

Another indirect influence on staple products such as rice, beans and meat is due to the fact that many fertilizers and pesticides are derived from petroleum. “This influence is already felt at the time of planting”, says Silber. Agricultural production will have to be adjusted to these new conditions.

“Because the producer will save on the use of fertilizer. The input became more expensive and then productivity drops. One more reason why the price will rise and harm a very large portion of the population that already faces enormous food insecurity”, he says.

He also points out that storage costs, when a product needs special treatment for heat or lighting, are also impacted.

Clothing

While Juliana Inhaz points out the influence of logistics costs for moving clothing products, Silber mentions some raw materials that can impact some specific items.

“For example, nylon is oil. And look at pantyhose. With the cold weather, demand for the product grew, which is not produced in Brazil. The yarn is derived from oil and its production has been impacted by the Ukrainian War “, says the economist from USP and Fipe.

Construction

Building materials like bricks and sand are heavily dependent on transport and can be influenced by rising travel costs, says Silber.

He also recalls that this sector has already been pressured by the increase in interest rates by the Central Bank, a measure used to contain inflationary trends.

About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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