The increase in fuel prices after the change of federal government is one of the fears that has accompanied a part of the population. This is because the fiscal measures taken by then-President Jair Bolsonaro (PL) to curb the rise in petrol prices, which exceeded R$7 in mid-2022, had an expiry date of December 31st. After all, what will prices be like during the Lula administration?
Since July, Jair Bolsonaro has begun enforcing fiscal measures to bring down fuel prices, such as the law limiting the ICMS on items such as diesel, gasoline, electricity, communications and public transportation, and cutting federal Cide and PIS/Cofins taxes on these products.
For months now, the increase in fuel prices has been seen as an issue that Lula should address on his first day in office. And so it was. Shortly after taking office, the new president decided to extend the federal tax exemptions on gasoline and ethanol until the end of 2023 and until the end of 2023 on diesel, which would have a greater influence on inflation. at least R$0.69 on a liter of petrol, R$0.35 on a liter of diesel and R$0.24 on a liter of ethanol.
Despite the fact that the PT defended in its campaign that the focus of the fuel price increase was Petrobras’ pricing policy, and not the tax burden, the extension was necessary in order not to impact inflation and the public opinion in the early days of government. In GloboNews, the president of the party, Gleisi Hoffmann, reiterated that the pricing policy of the state-owned company will be reviewed.
“In particular, I defend that there is an extension until we go in to see how Petrobras’ fuel pricing policy is going. Because the problem is not the tax issue, it’s Petrobras’ pricing policy, it’s dollarization that happened”.
Even with the extension, the price should go up
Despite the extension, the trend is for fuel prices to rise again in the country. At the beginning of December, the National Committee of State Finance Secretaries (Comsefaz) recommended to the States to increase the ICMS collection on fuels up to 4%, to mitigate the collection losses in the State coffers which, according to the Committee, would lose more than BRL 124 billion in revenue in 2023.
“These are critical assets to keep their public services functioning, and without fiscal rebalancing measures, subnational entities will face a worrying scenario from 2023 onwards,” Comsefaz said. Even the institutional director of the committee, André Horta, reiterates that it is not a question of increasing the tax, but of returning to the level prior to the change. After the suggestion, 11 states approved hikes of up to 4% to their rates.
scenery for squid
For the economist Igor Lucena, if it were the will of the new government, there would be room for the exemption from federal taxes to continue longer.
“There is no doubt that PIS/Cofins and CIDE are taxes which, if they return to their original rates, will affect fuel prices, public policies and the global inflationary scenario, which tends to worsen as the recession in Europe deepens due to since the war,” explains the expert.
For Jason Vieira, partner and chief economist at Infinity Asset, fuel prices will certainly rise, but we depend on the international scenario to know how much.
“There is not a very absurd movement with the tax refund. It is a cent increase. Fuel will cost more, but how much depends on the international issue. We have challenges that can throw the balances off balance, such as the non-resolution of the conflict between Russia and Ukraine and the progress of the ESG agenda to reduce the oil industry”, analyzes.
In Lucena’s analysis, the impact of maintaining the Cide and PIS/Cofins exemption is less harmful than returning without a new price containment policy.
“Despite the zero values, there has not been, at least in 2022, a fiscal deficit due to this exemption, since the inflationary compensation is positive. be discussed, once again, in the national Congress and sanctioned by the president-elect”, he evaluates .
What did Lula promise?
Despite the possibility, maintaining the measures taken by Bolsonaro longer is not part of Lula’s plans. During the campaign, the president promised another course of action to keep fuel prices low: change Petrobras’ pricing policy, which currently aligns with the worldwide cost of producing petroleum derivatives. Also, when he was a candidate, Lula criticized the ICMS ceiling, but left the decision to the STF.
During an interview with SBT in September, the then-candidate promised to change Petrobras’ pricing policy. “He [Bolsonaro] could have reduced the price of gasoline without changing the ICMS tax stateside, he tried to prove he could win politically. I don’t want to mess with politics that belongs to the governor. The governor takes care of your taxes. What I want to do is change the policy of the President of the Republic: that is the price of Petrobras”.
Lula touched on the subject again when he named Senator Jean Paul Prates (PT-RN) to the presidency of Petrobras. He said fuel prices could fall at refineries after the new advice takes effect.
According to Deyvid Bacelar, general coordinator of the Unified Federation of Petroleum Workers (FUP), an organization that supported the president-elect’s campaign, it is possible to expect from the new government a pricing policy that takes into account production costs in the country, and not global scenario.
“There will undoubtedly be a change. A new pricing policy must be created to contain fluctuations in accordance with the dollar and the international market. This will reduce the price of fuel in Brazil. Lula talks about Brazilianising fuel prices, from 95% of the oil that is refined in Brazil comes from the pre-sal layer, i.e. it is not pegged to the dollar. It is estimated that two-thirds of oil production and refining is real, there is no reason to charge in another currency,” currency.
Bolsonaro held the price of fuel
According to data from the Brazilian Association of Fuel Importers (Abicom), taking as reference the values of petrol, diesel, foreign exchange, RVO and sea freight, in October, the month of the elections, the price of fuels presented delays far from parity.
In the assessment at the time, the average lag was -25% for diesel and -16% for petrol. If they were retrofitted according to the Import Parity Price (PPI) policy, diesel would cost R$ 1.83 more over the period and petrol R$ 0.95.
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