Brazil's state managed oil company Petrobras said it will raise gasoline and diesel prices for the first time since 2008, a move aimed at ending refining losses and paying for the world's largest corporate spending plan.
Petrobras will raise the wholesale price of gasoline by 7.83% and diesel by 3.94% effective Monday June 25, the Rio de Janeiro-based company said in a statement sent to Brazil's securities regulator.
Without raising fuel prices, the company would be unable to pay for 237 billion dollars, five-year investment plan, Chief Executive Maria das Graças Foster cautioned earlier in the month.
Without the raise, fuel prices are between 20 and 25% below the level needed for Petrobras to stop losing money, according to Lucas Brendler, oil and gas analyst at Geração Futuro, which manages about 3 billion dollars of stocks and bonds in Porto Alegre, Brazil.
The increase represents a victory for CEO Foster and may confirm some analysts' expectations that she will improve Petrobras management by reducing political manipulation of its operations.
A career Petrobras employee who has worked closely with Brazilian President Dilma Rousseff, she was appointed CEO of Brazil's largest company in January. She announced her first five-year plan last week, the company's largest ever.
Opposition to price increases within government was strong until only days ago with the anti-increase calls led by Finance Minister Guido Mantega, who is also chairman of Petrobras' board of directors. Energy Minister Edison Lobão also spoke out against an increase.
Mantega is concerned that price increases could hurt Brazilian growth. Disappointing economic data in the first quarter forced Mantega to cut his outlook for 2012 GDP by more than a third, to 2.7% from 4.5%. Credit Suisse on Wednesday said Brazil's GDP will grow only 1.5%.
To prevent the fuel increase from hurting consumers, the government cut a key fuel levy known as CIDE to zero, which should offset the impact of the increase from the refinery at the gas station pump.