Tuesday, October 28, 2014 8:05:17 PM
By Anna Edgerton Oct 28, 2014 5:45 PM MT
http://www.bloomberg.com/news/2014-10-28/brazil-said-to-delay-petrobras-gasoline-price-relief.html?cmpid=yhoo
Petroleo Brasileiro SA (PBR), the state-run oil producer, will have to wait longer for permission to increase fuel prices in Brazil, a government official said.
A 22 percent plunge in the price of crude this year has bought international benchmarks more into line with Brazil’s subsidized refinery gate prices, the cabinet level official who participated in discussions, said today. The government will also refrain from reintroducing a tax on gasoline, known as Cide, for now, the official said, asking not to be named because the decision hasn’t been made public.
Oil’s rout is giving Petrobras some relief in its role as a government inflation-fighting tool after the Rio de Janeiro-based company booked $44 billion in operating losses from selling fuel at below-market prices. Still, at last month’s board meeting Chief Executive Officer Maria das Gracas Foster said the company needs at least a 10 percent increase in fuel prices, a person with knowledge of the matter said.
The decision to maintain caps and taxes for now is part of an effort to end 2014 within the upper limit of the central bank’s 6.5 percent inflation target range at a time the economy is growing less than 1 percent, the official said.
Petrobras shares in New York slumped 3.3 percent in after hours trading today.
Authorities are scheduled to meet Oct. 31 to discuss a possible increase in the gasoline price, broker-dealer Newedge said in a note to clients dated today. The Presidency declined to comment on plans for fuel prices. The Finance Ministry and Petrobras didn’t respond to e-mailed requests to comment.
Value Plunge
Fuel prices are set by Petrobras’ board, which is led by Finance Minister Guido Mantega. The government of President Dilma Rousseff, re-elected Oct. 26 to another four-year term, controls the company through a majority of voting stock. The company’s market value plunged $160 billion in her first term.
Petrobras said on Nov. 29 that it approved a new methodology for adjusting gasoline and diesel prices to guarantee that indebtedness and leverage ratios would return to target levels within two years. Foster told the last board meeting that a 10 percent price increase wouldn’t be enough to bring ratios back to target levels, the person said.
"Then there was a woman, a lion of a woman."
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