Brazil's Petrobras scraps international price peg
Brazilian state-run oil company Petrobras said Tuesday it has ended its policy of pegging fuel prices to the international market, an overhaul promised by President Luiz Inacio Lula da Silva that had initially caused investor jitters.
Petrobras, whose prices essentially determine how much Brazilians pay at the pump, said it would still set them using "market references."
But it said in a statement that the announcement "puts an end to the mandatory subordination (of prices) to the import parity price" in US dollars.
Veteran leftist Lula, who took office for a third term in January, had vowed during his election campaign to "Brazilianize" the company's pricing policy, saying the old policy aimed to "please investors, to the detriment of the Brazilian people."
Investors in Petrobras had resisted changes to the policy, which helped Brazil's biggest company deliver record profits of $36 billion last year thanks to the global surge in fuel prices.
Petrobras followed up the policy change by announcing hefty price cuts almost immediately: 12.6 percent for gasoline, 12.7 percent for diesel and 21.4 percent for cooking gas.
"I am particularly happy, and I think the people will be too," Lula said in a video posted to his social media channels after the decision.
"More than a campaign commitment, it is a victory of the people... And it is only the beginning. We are going to invest in industry and the generation of jobs," the president added.
Petrobras chief executive Jean Paul Prates, a former senator named to the post by Lula in January, said the decision will make the company "more efficient and competitive."
"We will continue to be the market reference, without abdicating the (company's) competitive advantages," added Prates, a former senator named to the post by Lula in January.
Markets welcomed the announcement, with analysts saying investors had feared a more radical overhaul of the international price peg policy, which had been in place since 2016.
Petrobras shares rose Tuesday more than four percent on the Sao Paulo stock exchange before settling back to around 2.2 percent at the close.
"The market was expecting something much worse, a direct intervention," said oil industry analyst Israel Rodrigues, of Genial Investimentos.
Prates told a news conference there would be "no intervention" by the government in price-setting.
The company's competitiveness and profitability "are guaranteed," he said.
Brazilians have suffered recently as the Ukraine war drove international oil prices to multi-year highs, triggering painful inflation that became a central issue in Lula's election battle last year against far-right incumbent Jair Bolsonaro.