Brazil Petrobras increases gasoline prices by 6.6%

30 January 2013 19:17  [Source: ICIS news]

HOUSTON (ICIS)--Brazil's state-owned energy producer Petrobras put into effect on Wednesday an increase in the price of gasoline, a move long sought by ethanol producers in the country.

Petrobras increased ex-refinery gasoline prices by 6.6% and diesel prices by 5.4%, the company said.

From 20-26 January, the average price of gasoline in Brazil was R2.763/litre ($5.23/gal, €1.02/litre), according the Agencia Nacional de Petroleo, Gas Natural e Biocombustiveis (ANP).

The increase in the price of gasoline could benefit ethanol producers by allowing the price of the biofuel to increase.

Gasoline prices in Brazil can affect ethanol prices because the nation has such a large fleet of flexible-fuel vehicles (FFV) that can run on gasoline or standalone hydrous ethanol.

FFV drivers normally choose gasoline over ethanol when the two fuels cost the same, a trend that has hurt ethanol profitability because of Brazil’s policy of controlling the price of gasoline to keep inflation in check.

Brazil's sugarcane industry association Unica has repeatedly called on the country to stop controlling gasoline prices, claiming the biofuel cannot compete in the marketplace when the price of gasoline never moves.

Although the move by Petrobras could benefit ethanol, a producer in Sao Paulo said the 6.6% bump was unlikely to help because the effective increase at the pump would only amount to 4%.

“We would need at least a 7% increase at the pump to see a difference,” the producer said, adding that hydrous ethanol prices are unlikely to climb as a result of the announcement.

Brazil’s gasoline policy has had a detrimental effect on Petrobras, as the company lacks the refining capacity to meet domestic demand. As a result, the company imports fuel at international prices and sells it at lower domestic prices.

Brazil's third-quarter net income fell by 12%, and the company actually reported a rare loss in the second quarter.

The increase in gasoline prices is the second such hike in less than a year.

In June, Petrobras increased gasoline prices by 7.83% and diesel prices by 3.94%.

($1 = €0.74, $1 = R1.99)

Additional reporting by William Lemos

By: Al Greenwood
+1 713 525 2645

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