Gasoline and diesel prices in Brazil over the years

(December 6, 2016)

In Brazil, the national average retail prices of gasoline and diesel fuel have been increasing since 2014 despite the international crude oil price slump. The downward trend in oil prices that began in mid-2014 led to a decline in the cost of a barrel from over 110 USD to below 40 USD. However, Brazilians have not felt any relief at the pump. During the same period (2014-2016), the retail prices of both gasoline and diesel fuel increased over 20 percent. The retail price of gasoline, for example, went from 2.99 BRL per liter in November 2014 to 3.68 BRL per liter in November 2016.

The first reason that prevented the fuel prices from declining was the depreciation of the local currency, the Brazilian real, against the US dollar. Oil is purchased internationally in USD and the currency depreciation cancels the effect of the lower oil prices. In Brazil, however, most of the energy needs are covered by local production so the currency effect should be less significant. In early 2015, an increase in the taxes on petrol and diesel fuel was introduced. That inevitably affected the retail fuel prices and they rose strongly as you can see from the chart.

The third reason for the fuel price increases in Brazil is that government-controlled Petrobras has a monopoly on the petroleum terminals, pipelines and refineries and has used higher prices to compensate for its losses prior to 2014 when fuel prices were kept below the international level in order to prevent inflation.

However, in October 2016 Petrobras announced the implementation of a new pricing policy that ensures greater correlation between international crude oil prices and local fuel prices. The implementation of the policy immediately led to a decrease in the retail fuel prices.

Here are the latest gasoline prices and diesel prices in Brazil.

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