Impact of fuel prices contention in Brazil and pricing mechanisms options
Petrobrás was severely affected by the government’s fuel pricing policy. By meeting the increasing demand of LPG, diesel and gasoline, whose prices were below international reference, the company has lost R$ 98 billion in income from 2011 to 2014. In a period of high investments due the exploration of the Pre-salt, this loss raised Petrobrás debt and deteriorated its financial situation. Should full alignment with the international price be not politically feasible, the international experience suggests adopting stabilization fund as proper pricing mechanism. Political interferences in its management, however, should be prevented.
JEL Classification: Q32; Q38; Q43.
Keywords: oil products prices Petrobras pricing mechanisms stabilization funds