Alexandre Schwartsman says that the fuel gap will suffocate the state’s cash and expel importers from the market
Economist and former director of the Central Bank, Alexandre Schwartsman, told the Power360 It is on this Tuesday (Aug.1.2023) that Petrobras is repeating the same mistakes of the Dilma Rousseff era by not readjusting the lagged prices of gasoline and diesel oil.
For Schwartsman, the fuel mismatch keeps private importers out of the market who see no sense in buying abroad at a high price and selling at a price below the market in Brazil. As a result, Petrobras is forced to import more products to supply the domestic market because the country’s production is not self-sufficient in oil derivatives.
As reported by Power360 Last week, Petrobras held back on possible increases in fuel prices despite the rise in the price of a barrel of oil. On Friday (July 28), the difference in the average price of gasoline sold at the state-owned refineries compared to international prices reached 24%. Already diesel oil is 21% below.
“It so happens that if the domestic price is much lower than the international price, the private importer will not do this. He would have to buy abroad for a more expensive price and sell here for a cheaper price. So this importer goes out of business”said Schwartsman. “The mechanics are the same as we saw there in the Dilma government, the question is how long will this last”.
According to the most recent data released by Petrobras, the state-owned company imported 52 million liters of gasoline per day in the 2nd quarter of 2023. The amount represents an increase of 642.9% compared to the same period of 2022, when it imported an average of 7 million of liters of fuel.
“Petrobras’ import volume is rising a lot because the private sector is leaving this business and will no longer import paying dearly abroad and selling cheaply here, and so someone has to fill this gap between what is consumed and produced in here”, said the economist.
In addition to reducing the number of competitors, the practice of not adjusting prices ends up increasing Petrobras’ responsibility for meeting this need for imported fuels in the country. This generates a mismatch in the company’s finances, which is obliged to buy derivatives in dollars abroad and pass them on to consumers at an artificial price.
“We look at this and see that it’s going to be a huge problem, at some point it starts to eat up the company’s cash generation and anyway, even mistakes, we can’t even innovate. We make the same mistakes we’ve always made.” declared Schwartsman.
In Schwartsman’s view, avoiding the readjustment of gasoline also harms the ethanol sector. This is because the price of fuel is linked to that of gasoline and the lag ends up deteriorating ethanol prices.
“This also screws up the ethanol sector because the price of alcohol has to maintain a more or less fixed proportion of the price of gasoline, so when you control the price of gasoline you also indirectly control the price of alcohol. This is what broke the sugar and alcohol sector in 2013 and 2014”said the former director of the Central Bank.
#Petrobras #repeats #Dilma #administration #mistakes #economist