Brazil expands fuel relief as oil prices stay elevated
Brazil announces fresh fuel-relief measures including diesel subsidies and tax cuts as Brent crude remains near $100 a barrel.
Brazil's government has unveiled a new package of fuel-relief measures, combining direct subsidies for diesel with tax reductions on gasoline and ethanol. The decision comes as Brent crude prices remain close to $100 a barrel amid ongoing tensions in the Middle East.
The administration of President Luiz Inacio Lula da Silva said in a statement that elevated oil prices and continued uncertainty in global energy markets justify the measures. "The conditions that justify maintaining fuel-price smoothing policies remain in place," the government noted.
The new decree cuts federal PIS/PASEP and Cofins taxes on gasoline imports and sales by 0.63 real per liter through October 5. This replaces and expands an earlier subsidy of 0.44 real per liter. Taxes on ethanol have been reduced by 0.19 real per liter, effectively bringing federal levies on the biofuel to zero.
A diesel subsidy has been set at 1 real per liter under the scheme. Fuel producers and importers who opt into the program must deduct the subsidy from sale prices and record the discount on invoices, after which Brazil's oil regulator ANP reimburses participating companies.
State-run oil firm Petrobras, the country's main diesel producer, is expected to be most affected by the new diesel subsidy. The company's second-quarter operating cash flow had already suffered from delays in ANP reimbursements.
Earlier on Wednesday, Lula signed an executive order authorizing 6.6 billion reais ($1.3 billion) in extraordinary spending to cover various subsidies created in recent months. Of this amount, 5.6 billion reais will fund diesel subsidies, while 998 million reais will support domestic production and imports of gasoline, according to the Planning Ministry.