Brazil Moves to Cap Fuel Prices as Election Nears and Oil Spikes
Brazil's Lula signs fuel tax cuts and diesel subsidies to counter rising oil prices ahead of the October election.
Brazilian President Luiz Inácio Lula da Silva has signed a decree and a provisional measure aimed at reducing fuel costs for consumers, a move that comes just weeks before the country's presidential election and amid a sharp rise in global oil prices.
The measures include temporary tax cuts on the import and sale of ethanol, gasoline, and gasoline blends, effective from September 10 to October 9. A separate provisional measure authorizes a subsidy of one Brazilian real per liter for producers and importers of road diesel.
The policy response follows a surge in Brent crude prices, which crossed the $100-per-barrel mark for the first time since July. The increase is attributed to attacks on oil facilities and ships in the Middle East, which have disrupted supply chains and raised concerns about the stability of global energy markets.
Fuel pricing is a politically sensitive issue in Brazil, where voters will head to the polls in October. President Lula is seeking a fourth, nonconsecutive term, while Senator Flávio Bolsonaro, son of former President Jair Bolsonaro, is also in the race.
"We're not going to allow this irresponsible war to hit your pocket," Lula said while signing the measures.
Brazil is a major crude oil producer and exporter, and its revenues from the sector have increased this year due to higher international prices. However, the country still depends on imports to meet domestic demand for refined fuels.
Stabilizing diesel prices is also seen as critical to preventing truck driver strikes, which have historically disrupted food supply chains and caused significant economic losses. A nationwide truckers' strike in 2018 led to food price spikes and empty shelves at grocery stores and gas stations.
Economists note that the timing of the measures suggests an electoral dimension. "If it weren't for the political calendar, there would be some subsidy, but it would likely be lower," said Armando Castelar Pinheiro, an economics professor at the Federal University of Rio de Janeiro.
Market analysis indicates that diesel prices in Brazil are currently about 28% lower than international levels, while gasoline is about 21% cheaper.