Rising petrol prices

Petrobras, Brazil’s state-owned oil firm, is once again in danger, trapped in a political tug of war over rising fuel prices.

Far-right President Jair Bolsonaro, who is running for re-election in October, is heavily blamed by voters for double-digit inflation caused by increasing fuel costs, according to surveys.

Feeling the heat, Bolsonaro sacked Petrobras CEO Joaquim Silva e Luna last week, claiming that the petrol price was “unaffordable” and a “crime” against Brazilians.

Fuel costs in Brazil have risen 33 percent in the last year, owing to foreign market movements, even as the economy recovers from the consequences of the coronavirus outbreak.

Russia’s war in Ukraine has resulted in a recent surge in petroleum prices, adding to the strain.

“Manipulating tariff policy is like manipulating gravity,” Silva e Luna stated following his dismissal last week.

Meanwhile, inflation in Brazil has risen by more than 11% in a year, and surveys show that three-quarters of Brazilians blame Bolsonaro for their shrinking wallets.

Bolsonaro’s primary opponent, socialist former President Luiz Inacio Lula da Silva, has similarly promised to “Brazilianize the fuel price,” which means to adjust it to local conditions.

Lula, a former labour unionist and popular ex-leader, is widely seen as the frontrunner ahead of the October election.

– Sacrifice fire –

With the fuel price in both men’s sights, the future of Petrobras, which decides the price of gasoline at the pump, is heavily reliant on the outcome of the October elections.

The corporation has hardly had time to recover from the 2014-2021 Operation Car Wash corruption inquiry, which resulted in the convictions of numerous senior lawmakers and corporate leaders for embezzling billions of dollars from the oil giant.

Following a difficult year in 2020 due to the coronavirus outbreak, Petrobras earned a record net profit of about $20 billion in 2021.

However, the findings were insufficient to satisfy the political leaders.

According to economist Gesner Oliveira, Bolsonaro sacrificed Silva e Luna “to placate his electorate.”

Silva e Luna’s predecessor, Roberto Castello Branco, was removed by the president for identical reasons a year earlier.

However, removing the current CEO has proven to be more challenging than anticipated.

Bolsonaro’s choice, economist Adriano Pires, withdrew his name from the contest this week owing to a potential conflict of interest stemming from his other job as the head of an energy consultancy business.

Rodolfo Landim, another president’s candidate, resigned to focus on the Flamengo football club, of which he is president.

According to the Brazilian news, several other potential candidates had refused the position.

The administration then selected Jose Mauro Coelho, who was in charge of oil matters at the Ministry of Mines and Energy, on Wednesday.

His nomination might be approved by shareholders at a meeting on April 13, making him the 40th CEO of Petrobras in 68 years.

– ‘Difficult economic challenge’ –

The pressure from the top will be great, regardless of who is in charge.

“This is a position under intense political pressure, and each dismissal is an easy political answer to a complicated economic situation,” Prospectiva consultant Adriano Laureno told AFP.

Analysts believe that Petrobras’ internal regulations, which are posted on the New York and Sao Paulo stock markets, as well as Brazil’s dependency on imported oil, would prohibit any radical shift in pricing strategy.

“A stability fund may be established to reduce price volatility,” Oliveira explained. “However, changing the tariff policy in depth is not conceivable.”

Petrobras is also under threat of privatisation, which Bolsonaro and some of his top political supporters support.