Brazil Raises Fuel Prices

Brazil's state-run oil company Petroleo Brasileiro SA, known as Petrobras, raised prices for diesel and gasoline at its refineries in the country as of Dec. 6.

Petrobras said the price of diesel has increased by 9.5% and gasoline by 8.1%. The company said the adjustments were made after a spike in international oil prices and due to the recent weakening of Brazilian real, Reuters reported.

The move also came as Petrobras’ relatively new management team, led by Chief Executive Pedro Parente, seeks to burnish his market-friendly credentials in the eyes of investors. 

Before his appointment in May, the company was seen as more susceptible to political pressure that, in years past, led it to waste billions of dollars subsidizing fuel prices to help the government meet its inflation target.

Partly due to that mismanagement, Petrobras is now struggling to pay down $123 billion in debt, the largest amount of any company in the oil industry. Turning a profit in its refining business will likely prove crucial toward meeting the ambitious deleveraging targets set by the new CEO.

Under Parente, Petrobras says it will review fuel prices at least once every 30 days. Monday’s hikes will largely reverse the sizable price reductions Petrobras announced on Nov. 8, which raised concern among some investors and may have contributed to a selloff in its shares following the US election.

A number of analysts noted in recent days that OPEC’s deal to reduce oil output last week would amount to a key test for Parente. 

Following the rise in oil prices and the depreciation in the real over the past month, Brasil Plural estimated Petrobras was selling gasoline and diesel at a 1% and 3% discount to international prices.