The Brazilian government in coordination with Congress are working on the creation of a price stabilization fund for fuels in an attempt to isolate the country from the volatility of international prices of oil and refined products. The fund is to be financed mainly with a tax on oil exports, helping with stability to domestic prices of gasoline, diesel and liquid gas.
The three prices are highly sensitive, since they have a direct impact on transport and home cooking costs, and have triggered truck strikes which left the country on its knees.
In a symbolic vote on Tuesday, the Senate's Economic Affairs committee passed a bill implementing the tax and fuel price stabilization fund. The bill now heads to both houses of Brazil's Congress for further debate, which will likely take place during the first quarter of 2022.
The move was the latest attempt to counter a surge in international oil and refined product prices that has undermined much of Brazil's economic recovery. State-led oil producer and refiner Petrobras has raised domestic diesel, gasoline and LPG prices at the refinery gate to keep prices at parity with international imports, keeping to its charter but much to the chagrin of the government and public opinion.
Petrobras is required to maintain import-parity pricing as part of a November 2019 antitrust agreement, which also forced the company to sell eight of its 13 operated refineries. The controversial policy, however, has been in place since 2016.
The policy played a key part in Petrobras' financial recovery from a massive corruption scandal uncovered in 2014, which nearly tipped the company into bankruptcy after it was cut off from international financial markets.
It was also seen as a way to end long-running government meddling in Petrobras' prices. Petrobras lost as much as US$ 40 billion in profits in 2011-2014 because it was forced to sell expensive diesel and gasoline imports at a loss in the domestic market. The government, which controls Petrobras' board of directors, prohibited the company from passing along high international oil prices along to consumers at the pump.
The major corruption scandal in Petrobras and the freezing of fuel prices took place during the governments of the Workers Party of presidents Lula da Silva an his successor Dilma Rousseff. Lula ended in jail and Dilma replaced bt Michel Temer, her vice-president.
Markets and investors praised Petrobras' move to market-based pricing, but it also has its rabid nationalist supporters who feel that since Oil is ours, they loathe market policies.
The bill, which is backed by the now opposition Workers Party, PT, would impose a variable tax of with a floor of 2.5% on oil exports, depending on oil prices. The tax would be in effect on a sliding scale for oil prices between US$ 45 and US$ 100 a barrel