Brazil's fuel price transparency plan draws fire from Petrobras and fuel distributors
RIO DE JANEIRO
Petroleumworld 03 22 2019
Brazil's state-controlled Petrobras, fuel distributor Raizen and other companies are warning that oil regulator ANP's push for more transparency in domestic fuel prices could lead to unwanted price controls.
The companies and other industry representatives delivered their comments as part of a public hearing for new rules proposed by the ANP.
In 2018, the ANP proposed a robust disclosure framework that sparked fierce criticism from the industry. In February the agency published a revised proposal with lighter reporting requirements, among them an obligation for dominant actors to provide the agency with supply contracts including volumes.
Contracts between producer and distributor must be delivered to the ANP 60 days before they take effect, according to the ANP´s draft resolution. The ANP approval process will emphasize "free competition and guarantee of supply."
"The aim is to ensure transparency, this is the principle of the agency. It is far from ANP's intention to exercise any kind of control over prices," ANP director José Cesário Cecchi said at yesterday's hearing.
Companies and industry representatives say price parameters would run afoul of the constitutional freedom of pricing and cause market distortions.
Petrobras says the proposal would limit the freedom of market participants and allow the ANP to unduly influence price formation by hindering the "flexibility to form and readjust prices in a timely and appropriate manner in response to competitive pressures."
Raizen, a joint venture between Shell and Cosan, echoed those remarks. "The proposed model (impedes) pricing freedom for regulated economic agents, since the approval of the contracts is subject to approval of pricing parameters agreed between the parties, which we define as improper price controls."
Others suggested the proposal would thwart Petrobras' plans to divest refinery assets . The company now holds around 98pc of Brazil's refining sector. The firm's chief executive Roberto Castello Branco wants to reduce that to 50pc by selling off 100pc operating stakes in some refineries.
Many contributions argued that Petrobras' reduced role in the sector would naturally lead to more price competition.
The plan to increase transparency in a sector long subject to government interference was adopted in the wake of a crippling May 2018 truck driver strike. The nationwide work action forced the government to adopt a controversial diesel price subsidy that ended on 31 December.
A diesel price spike resulting from geopolitical tensions was mainly to blame for the start of the strike, but recurring hikes in state fuel taxes also contributed to successive increases. State taxes, which account for around 40pc of gasoline prices and 30pc of diesel prices, are a regular target of industry criticism, but are unlikely to be reduced in the short-term.
The public consultation process is ongoing. Additional hearings to discuss transparency in the natural gas and LPG markets are yet to be scheduled.
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