The diesel subsidy operates as a direct payment to producers and importers through the National Petroleum Agency, with the initial R$1.00 per liter rate adjustable by the Finance Ministry according to market conditions and resource availability. Provisional Measure 1389 opened an extraordinary credit of R$6.6 billion to fund the program, with R$5.6 billion allocated to diesel and R$998 million to petroleum-derived fuels. These extraordinary credits fall outside fiscal framework spending limits.
Petrobras initially announced gasoline prices to distributors at R$3.24 per liter but corrected hours later to R$3.05 per liter after incorporating the new tax relief. The company stated it awaits publication of legal acts before adjusting diesel pricing. Finance Ministry executive secretary Rogério Ceron attributed the pressure to a global refining crisis whose effect on diesel supersedes crude oil price increases alone.
Brent crude reached $102.49 per barrel on the morning of September 10, the first time above $100 since July, driven by attacks on Saudi Arabia’s East-West pipeline linking Yanbu port to the Red Sea and reports of vessel damage in the Persian Gulf. The Saudi pipeline closure, attributed to Houthi forces, eliminates a key export route circumventing Strait of Hormuz restrictions and could reduce global supply by up to 4%. Planning Minister Bruno Moretti said the subsidy costs will be covered by extraordinary petroleum revenues estimated above R$10 billion.
The intervention arrives one month before presidential elections in which Lula seeks reelection and coincides with Brazil entering peak agricultural harvest season, the period of highest diesel consumption. Through September 4, Brazil exported 40,580 tonnes of fresh, chilled or frozen beef during the first four business days, with daily average receipts down 22.5% as China reduced purchases and the European Union suspended Brazilian beef imports on September 3.
This article was curated and published as part of our South American energy market coverage.
