The Brazilian government's subsidy on diesel now adds up to R$ 2.12 per liter. The board of Petrobras, the state-controlled oil company, approved on Saturday, September 19, the company's entry into a new program worth R$ 1 per liter, which adds to the R$ 1.12 per liter already in force. In practice, the company gains more room to hold down the price of the fuel that powers trucks and buses, and with it the freight cost that ends up on supermarket shelves.
The new benefit runs for 30 days and can be extended for another 30. It was created by Provisional Measure 1,391, issued on September 11 (a Provisional Measure is a temporary presidential decree with the force of law that Congress must approve later), and regulated by Finance Ministry rule 2,813, published on Wednesday, September 16, which set the value at R$ 1 per liter of road-use diesel A. In a filing to the market, Petrobras said the move "is compatible with the company's interest" and that signing the agreement still depends on the program's final rules.
What the subsidy means
The economic subsidy, or subvenção econômica, is a payment the Treasury makes to producers and importers when oil prices and the exchange rate rise. The idea is that the increase does not reach the pump in full: part of the cost leaves the federal budget and lands in Petrobras' cash. For scale, the R$ 2.12 per liter is about 30% of the average pump price of diesel, which ended the week at R$ 7.13 per liter, the highest since May, according to the ANP, the agency that surveys fuel prices in Brazil.
Earlier in the week, Petrobras announced an average increase of R$ 1 per liter on diesel sold to distributors, along with a discount of the same size. The two moves canceled each other out, and the company's price stayed the same, according to news outlet G1. Petrobras said it keeps its commercial strategy, "avoiding the immediate pass-through to domestic prices of the volatility of international quotes and the exchange rate".
Petrobras has already received R$ 9.9 billion
Also on Saturday, the company said it received R$ 448 million from the gasoline subsidy program (Provisional Measure 1,358), covering sales made from July 16 to 31. With that payment, the accumulated total under the diesel, gasoline and LPG programs, the bottled cooking gas used in millions of Brazilian homes, reached R$ 9.9 billion. The money comes from the federal budget, paid by the Treasury to the company.
According to G1, with information from Reuters, the payments are part of President Luiz Inácio Lula da Silva's effort to soften the effects of higher oil prices since the start of the war in Iran, weeks before the October presidential election. Diesel dominates cargo transport in Brazil, which is why the government has focused on it. Petrobras said it remains committed to "responsible, balanced and transparent" conduct.