Brazil’s Petrobras to postpone fuel price hike until after tax cut vote -sources

(Reuters) – Brazilian state-run oil company Petrobras (PETR4.SA) will avoid raising fuel prices until after Congress finishes debating further tax cuts, two sources close to the matter told Reuters on Tuesday.

The firm’s management told the government on Monday that Brazil’s diesel and gasoline prices are lagging behind international markets.

Diesel prices, which the company increased in May, were 15% below international markets on Monday, while gasoline prices were more than 20% lower than the import parity price.

The final decision depends on factors like oil prices and the exchange rate, “but the idea is to hold,” said one of the sources on condition of anonymity.

On Monday, Brazil’s Senate approved a bill that caps the ICMS state tax on fuels and other items, a measure aimed at reducing prices to consumers. The bill still needs to be voted on by the country’s Lower House.

The logic is that if the final vote is successful, it would be “less traumatic” to carry out a price hike, due to the lower tax burden, said a source.

Petrobras said in a statement it maintains its commitment to competitive market prices, while wanting to avoid immediate price hikes caused by volatility in the international oil markets.

The Mines and Energy Ministry did not respond to a request for comment.

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