Why is the drop in prices in Brazil one of the biggest?

Brazilians are experiencing a moment of relief when it comes to fuel prices. After reaching almost R$ 8 a liter, the Gasoline recorded consecutive weekly dropsand in the last week it reached an average price of R$ 5.17 in the country.

Read more: Countries with the most expensive gasoline in the world: Brazil’s position is surprising!

According to data from the ANP (Agência Nacional do Petróleo, Gás Natural e Biocombustíveis), it was possible to find the derivative at R$ 4.13 per liter at some stations. As a result, Brazil gained positions in the ranking of the cheapest gasoline in the world.

The country went from 76th position to 39th in the survey prepared by Global Petrol Prices, climbing 37 positions. It also ranked in the top ten when it comes to further price reductions.

Petrobras announced its last cut on September 2, when gasoline went from R$3.53 to R$3.28 at the state-owned refineries. The previous reduction took place on August 16.

What explains the falls?

Several factors contribute to the relief in the value of fuels, explains economist Igor Lucena. The first of these is international pricing policy, a scenario greatly affected by the war in Ukraine.

“The United States is using its oil reserves to pressure Middle Eastern producing countries to increase their volume. Furthermore, despite the trade embargoes imposed on Russia, due to the war against Ukraine, the Russians sell their oil to India, which passes it on to the world at a different price. In other words: there is an increase in supply compared to the beginning of the crisis”, he details.

The price of a barrel of Brent oil, which reached US$ 130, today costs around US$ 95.06. “All this makes distributors and refineries have a reduction in prices”.

Another important point is the tax cut announced by the government, which limited ICMS rates on fuel. The percentages, which reached 30% in some states, cannot exceed 18% by the end of this year.

“As in Brazil the tax is collected at different stages of the chain, the reduction of this tax has a very big impact. If we used to pay ICMS in cascade, this cut also affects all stages and the difference becomes much greater in practice”, says the economist.

Compensation

The reduction of ICMS generated a billionaire loss for the states, since the tax is one of their main sources of revenue. According to data from XP, the loss should reach R$ 103 billion in revenue in just six months.

The law that limited the rate requires the Union to compensate the federative entities for the loss, but this should only occur in 2023. Dissatisfied with the government’s decision, seven states have already gone to court and secured a provisional victory in the STF (Supreme Federal Court) .

“States and municipalities will judicialize this issue, which will cause increased legal uncertainty and, consequently, investment flight. The project still violates the federative pact and leaves states and municipalities in an ungovernable situation, without money to guarantee health, education, security and other services”, says the president of Febrafite (National Association of State Tax Inspector Associations), Rodrigo Spade.

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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