Brazil is studying the possibility of funding future funds to subsidize domestic fuel prices, in line with expectations from an offshore oil auction later this year, a source with direct knowledge of the government’s plans told Reuters this week.
Earlier this year, fuel prices and price hikes became a bone of contention between Brazilian President Zaire Bolsonaro and state oil company Petrobras.
Fears of further government intervention in Brazil’s oil sector prompted significant sell-offs in Petrobras shares.
Petrobras insisted that it would set Brazilian petrol and diesel prices based on international oil prices and import prices, while Bolsonaro was not satisfied with the price increase when trying to save the Brazilian economy amid the worst COVID outbreak in the world.
So, according to Reuters sources, the government is now considering spending some money on oil auctions from the November Sapia and Atapu oil fields in the pre-salt Santos Basin, which subsidizes fuels and protects consumers from price fluctuations.
The oil auction, which will follow one that didn’t attract bidders in 2019, is expected to bring the government between US$3.5 billion (20 billion Brazilian reals) and US$5.3 billion (30 billion reals), according to Reuters’ source.