The Ministry of Development, Industry, Trade and Services justified the extension based on deteriorating geopolitical conditions in the Middle East, specifically citing renewed tensions in the Strait of Hormuz following U.S. strikes against Iran. Brent crude prices jumped over 5% on July 8 to approach $80 per barrel, prompting the government to reverse earlier signals about reducing or eliminating the tax. Finance Minister Bruno Moretti had indicated the previous week that officials were evaluating a reduction or elimination of the levy.
The tax aims to discourage exports and ensure adequate domestic refining capacity to prevent fuel shortages in Brazil’s internal market. State-controlled Petrobras supports the measure, while the Brazilian Petroleum, Gas and Biofuels Institute (IBP), representing major private producers including Shell, Equinor and Exxon, has mounted opposition since March. IBP president Roberto Ardenghy criticized the administrative renewal, arguing that new taxes require congressional approval through complementary law rather than provisional measure or executive decision.
Industry groups contend the tax serves revenue generation rather than market regulation, undermining its legal basis as a regulatory instrument. The constitutional dispute has reached the Supreme Federal Court. IBP warned the extension will negatively impact production projects and investment plans, particularly as South American competitors attract capital with more stable fiscal frameworks.
The government will reassess the tax within 30 days based on international market developments. Separately, officials postponed planned reductions to gasoline subsidies, with Finance Minister Dario Durigan signaling a gradual approach to removing fuel support measures given renewed price pressures.
This article was curated and published as part of our South American energy market coverage.
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