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January 30, 2013 2:10 am
Petrobras, Brazil’s state-controlled oil company, has been authorised to increase fuel prices in a move that is set to bring relief to its long-suffering shareholders but add to the emerging market’s inflation concerns.
The Rio de Janeiro-based company said late on Tuesday that it will raise gasoline prices at refineries by 6.6 per cent and diesel by 5.4 per cent as of midnight.
Petrobras also reiterated its intention to bring domestic prices in line with those on the international market.
Unofficial fuel price controls in Brazil designed to cap inflation and boost growth have recently forced Petrobras to import fuel at a loss to meet rampant demand among the country’s growing middle class.
In August the company posted its first quarterly loss in 13 years and concerns are growing about its ability to deliver its $237bn five-year investment programme – one of the world’s largest corporate spending plans.
“This readjustment was set taking into consideration the company’s pricing policies, which aim to align the price of derivatives with prices in the international market in the medium to long-term,” the company said in a statement on its website.
The announcement comes a day after workers at Petrobras’s oil terminals, refineries and platforms went on strike to protest the 2012 profit-sharing proposal, which was 40 per cent lower than the previous year’s as a result of the company’s dwindling returns.
Petrobras last raised wholesale gasoline and diesel prices in June last year by 7.83 per cent and 3.94 per cent respectively, but the government offset the increase at the pump though tax cuts.
Tuesday’s move is likely to add to inflation concerns in Brazil and prove unpopular with consumers.
Annual inflation in 2012 hit 5.84 per cent, well above the centre of the central bank’s target range of 4.5 per cent in spite of the economy’s lacklustre growth.
However, Petrobras’s announcement is likely to be welcomed by investors, although some may have expected an even bigger increase to gasoline prices.
Brazil’s O Estado de S. Paulo newspaper reported this month that the government planned to raise gasoline prices by 7 per cent and diesel prices 4-5 per cent.
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