Petrobras Cuts Diesel Prices for First Time in Over a Year

RIO DE JANEIRO, Brazil – Brazilian state-run oil company Petrobras announced on March 31 that it will lower refinery gate diesel prices for the first time in more than a year. This cut, effective April 1, comes as local diesel prices exceed levels deemed reasonable in terms of import parity.

Petrobras stated it will reduce the price of diesel sold to distributors by 4.6%, bringing it to 3.55 reais ($0.6197) per liter. Despite this change, gasoline prices will remain stable. In addition, the company will also decrease jet fuel prices to distributors by an average of 7.9%, effective the same day.

This is the first adjustment to diesel prices by Brazil’s largest oil refiner since early February, when prices were raised by nearly 7%. The latest price cut marks the first in over a year, following a previous cut in December 2023, offering relief amid surging inflation that has impacted approval ratings for President Luiz Inacio Lula da Silva.

Lula’s administration has implemented a new pricing strategy, aimed at insulating domestic fuel prices from the fluctuations of the international market while maintaining profitability for the company. According to Petrobras, this strategic approach is necessary given that Brazilian diesel prices had remained above import parity for much of March, with prices landing 2% above parity on Monday, according to Abicom, a fuel import association.

Petrobras’ recent decision comes alongside an appreciation of Brazil’s currency, which has strengthened almost 8% against the U.S. dollar this year. Concurrently, global oil prices have fallen below levels at which Petrobras last raised prices.

The decision to lower diesel prices may improve the public sentiment towards the government, as Lula’s approval ratings have dipped significantly in recent months due to ongoing inflationary pressures. This move aligns with a broader need to stabilize prices while ensuring that essential fuels remain accessible to Brazilians.

($1 = 5.7289 reais)