(Reuters) – Recent tax cuts in Brazil should gradually boost demand for gasoline and ethanol in Brazil through year end, but not enough to reach pre-pandemic levels, S&P Global Commodity Insights said on Wednesday.
In its fresh Latin American Oil Market Forecast report, the financial information provider said a recovery has already been seen lately, but noted that demand for gasoline and ethanol in Latin America’s largest economy was still falling short of levels reached three years ago.
From January to June 2022, local consumption grew by 30,000 barrels of gasoline equivalent per day from the same period last year, but was down 35,000 barrels from 2019 levels.
“The demand recovery has been held back by a number of factors this year,” S&P analyst Lenny Rodriguez said, citing strong benchmark gasoline prices, high inflation, modest economic growth and persistently high unemployment rates.
Brazil’s government has recently cut taxes levied on fuels in a bid to rein in high inflation, which had been hurting President Jair Bolsonaro’s popularity ahead of an election in October. That move is seen driving fuel demand up.
S&P expects demand for gasoline and hydrous ethanol, which compete at the pumps as most of Brazil’s car fleet can run on 100% ethanol due to flex fuel engines, to increase by 20,000 barrels per day in the third quarter from last year.
It would, however, remain 5,000 barrels per day below pre-pandemic levels, the report added.