Rising gasoline prices are creating uncertainty at oil giant Petrobras

Brazil’s state-owned oil company Petrobras is once again in crisis: political tug-of-war over rising fuel costs.

Far-right President Jair Bolsonaro, who is seeking re-election in October, is widely blamed by voters for double-digit inflation, polls show, due to skyrocketing fuel prices.

Feeling the heat, Bolsonaro fired Petrobras CEO Joaquim Silva e Luna last week, saying the price of gas is “unaffordable” and constitutes a “crime” against Brazilians.

Fuel prices in Brazil rose 33 percent last year due to international market movements, even as the economy recovered from the effects of the coronavirus pandemic.

Russia’s war in Ukraine has caused crude oil prices to surge in recent weeks, adding to the pressure.

Petrobras calculates the price of petrol at the pump Photo: AFP / CARL DE SOUZA

“Manipulating customs policy is like manipulating the law of gravity,” Silva e Luna said after his release last week.

Meanwhile, inflation in Brazil rose more than 11 percent in a year, and opinion polls show that three-quarters of Brazilians blame their thinning wallets on Bolsonaro.

Bolsonaro’s main rival, left-wing former President Luiz Inacio Lula da Silva, has also vowed to “Brazilize the price of gas” – that is, to adjust it to the reality on the ground.

Lula, a former union leader and popular ex-leader, is the favorite ahead of October’s election.

Incumbent President Jair Bolsonaro (L) and former leftist leader Luiz Inacio Lula da Silva face off in October's general election Incumbent President Jair Bolsonaro (L) and former leftist leader Luiz Inacio Lula da Silva face off in October’s general election Photo: AFP / EVARISTO SA

With the price of fuel in the crosshairs of both men, the future of Petrobras – which sets the price of petrol at the pump – hinges heavily on the outcome of October’s election.

The company had little time to calm down following the 2014-2021 Operation Car Wash corruption probe, which saw several top politicians and business figures convicted of embezzling billions of dollars from the oil giant.

After a difficult year in 2020 due to the coronavirus pandemic that froze global travel, Petrobras reported record net income of nearly $20 billion in 2021.

But the results weren’t enough to satisfy the political bosses.

Jose Mauro Coelho has been nominated as CEO of Petrobras Jose Mauro Coelho has been nominated as CEO of Petrobras Photo: AGENCIA BRASIL via AFP / Fabio POZZEBOM

According to economist Gesner Oliveira, Silva e Luna was sacrificed by Bolsonaro “to please his voters”.

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

But replacing the youngest CEO is proving to be more difficult than expected.

Bolsonaro’s choice, economist Adriano Pires, withdrew his name from the running this week over a possible conflict of interest over his other role as head of an energy consulting firm.

Another presidential candidate, Rodolfo Landim, also withdrew to focus on Flamengo football club of which he is president.

According to the Brazilian press, several other possible candidates had turned down the job.

Then, on Wednesday, the government nominated Jose Mauro Coelho, who was in charge of oil affairs at the Ministry of Mines and Energy.

His appointment could be approved at a shareholders’ meeting on April 13, making him Petrobras’ 40th CEO in 68 years.

Whoever is at the helm, the pressure from above will be great.

“This is a position that is subject to very strong political pressure and any sacking is a simple political response to a complex economic problem,” Adriano Laureno of consultancy Prospectiva told AFP.

Analysts say internal regulations at Petrobras, which is listed on the New York and Sao Paulo stock exchanges, and Brazil’s reliance on imported oil are preventing a drastic change in pricing policy.

“A stabilization fund could be set up to mitigate price volatility, but it is not possible to change tariff policy in depth,” Oliveira said.

Petrobras is also under threat of privatization, a move favored by Bolsonaro and several of his key political backers.

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