Brazil’s state-led oil company Petrobras said it will raise gasoline and diesel prices for the first time since 2006, 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 per cent and diesel by 3.94 per cent effective 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 a $237 billion, five-year investment plan, Chief Executive Maria das Gracas Foster said on June 15.
“The gap between fuel and crude prices was a financial drain on Petrobras and was a headache in the most recent quarterly financial results,” said Ricardo Correa, oil and gas analyst at Ativa Corretora, a Rio de Janeiro stock brokerage.
“There was an urgent need to generate cash,” he said. Without the raise, fuel prices are between 20 and 25 per cent 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 of stocks and bonds in Porto Alegre, Brazil.
The increase represents a victory for 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 chief executive 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.