What does the end of international oil price parity mean?

Since 2016, based on the PPI, the prices practiced in the country were linked to the values ​​in the international market, having as reference the price of a barrel of oil type brentwhich is calculated in dollars.

Costs such as ship freight, internal transport logistics and port fees were also considered. In addition, a margin was added to remunerate risks related to the operation, such as the volatility of the exchange rate and prices practiced in ports.

In practice, prices followed the trend of the international market: the state-owned company did not have the autonomy to counterbalance the large variations and to avoid strong repercussions in Brazil that reached the consumer. With this model, Petrobras achieved record profits and dividend distribution. The results for the second half of 2022, for example, allowed for a historic transfer to shareholders of BRL 87.8 billion.

How will it be from now on?

Changing this policy was a promise made by President Luiz Inácio Lula da Silva during the election campaign last year. Since taking office in January, he has defended the need to “Brazilianize” fuel prices and said he sees no reason for Brazil to be subject to the PPI. In March, the president criticized the distribution value of Petrobras’ dividends and demanded that the profit of the state-owned company be reversed in investments across the country.

In the new model, Petrobras does not fail to take the international market into account, but will do so based on other references for calculation. In addition, internal market references will be incorporated. The proposal signals an effort to mediate between the interests of the shareholders and the social role of the state-owned company defended by the government, aimed at meeting the expectations of the Brazilian consumer for lower values.

The state-owned company announced that the new model will consider the “customer’s alternative cost” and the “marginal value for Petrobras”. The alternative cost for the customer is established based on the alternatives that the consumer has on the market, observing the prices practiced by other suppliers that offer the same or similar products. The marginal value for Petrobras considers the best conditions obtained by the company for production, imports and exports. According to Petrobras, this model will also allow it to be more competitive in each market and region, applying values ​​aligned with local specificities.