The government steps in, the government leaves, and the tradition of making ticking bombs in the energy sector continues on the scene. Now it couldn’t be any different, especially as the 2022 presidential election approaches.
Time bombs have gained strength during the pandemic in the face of the need to fight inflation. According to the latest IBGE data, official inflation, according to the National Broad Consumer Price Index (IPCA), has accumulated 2.05% in 2021 through March and 6.10% in the past 12 months ending in March. The main impacts come from higher fuel prices, which rose by 11.23% in the third month of the year alone, and gas cylinders by 4.98%.
When looking at the accumulated number from 2021 to March, the average consumer price for diesel increased by 18%, gasoline 23% and LPG by 11%.
Electricity tariffs will also affect consumers’ pockets this year. The water tanks in the southeast end the wet period, by the end of March, at a level of 35%, the lowest level in the past 90 years. Last year, the level was 52% at the end of March. This indicates that thermal plants are expected to continue operating for a large part of the year and that the probability of a prevailing red flag is very high in 2021. Not to mention natural gas, which will have an increase introduced by Petrobras (PETR439% from the beginning of May.
In light of this scenario, the risks of intervention in energy prices increase. Some measures have already been taken, such as the PIS / CONFINS exemption on diesel for a period of two months (March and April). The same metric was applied to the price of gas cylinders, but for an indefinite period. In the case of the electricity sector, a decree was issued that differs in the dollar-bound Itaipu station tariff. It would also help reduce increases in the “Covid Account”, which was created last year for energy distributors, and now we’ll see what the solution will be to reset distributors who have the IGP-M as an indicator.
The real truth is that President Jair Bolsonaro’s comments on energy prices have frightened the market. The most recent was the 39% increase announced by Petrobras For natural gas from the beginning of May this will be “unacceptable”. The president talks about the need to be predictable in energy price policy, and whenever possible accuses states of having a “tax collector” – while always ensuring that he will not interfere with prices.
In fact, everything will depend, in the case of fuel, on the behavior of the oil price and the exchange rate, which at the beginning of 2021 pressured – and was pressing – the price of fuel in the domestic market. In the case of the electricity sector, everything depends on the level of the hydropower reservoir and the growth of the economy.
The fear is that the ancient history of interfering with energy prices and creating ticking bombs, especially as the electoral calendar approaches, will be repeated. Between 2011 and 2014, the intervention of former President Dilma Rousseff’s government in Petrobras’ pricing policy created a cash gap of about $ 40 billion in the company, in addition to a $ 3 billion fine imposed by the High Court of Justice. United State.
The price intervention was not limited to fuel. The electricity sector suffers to this day from the effects of Law No. 12783/2013 issued by the well-known Representative No. 579/2012. At the time, the law required power generation and transmission companies to expect renewal of their concessions, subject to a 20% reduction in electricity tariffs. By artificially lowering tariffs, the measure wrongly indicates an abundance of water resources, resulting in lower levels of hydroelectric dams, which have not yet recovered. This resulted in a leak of R $ 100 billion and the “2015 tariff”.
However, despite the electricity sector and Petrobras nearly broken by these populist policies, former President Dilma was re-elected in 2014.
Recent actions by the current government, as well as statements by President Bolsonaro, have heightened concerns about the sector’s future. Everything leads to the belief that the government’s actions reflect what happened in previous governments in the search for reelection. And then the bet may be to reduce prices and create time bombs that will explode at some point.
Inauguration of the new president of Petrobras, General Joachim Silva e LunaThree points drew attention. The first reason is due to the symbolism of the opening image in the presence of four soldiers: Silva, Luna, Admiral Pinto Albuquerque, Eduardo Barcellos and Rudolfo Saboia. It marks a return to the militarization of the oil and natural gas sector.
The second is when the new president talks about reducing volatility and forecasting fuel prices. Volatility is determined by the price of a barrel on the international market and the exchange rate. Both are not under Petrobras’ control.
As for predictability, he might consider setting readjustment periods every 15 days or 30 days. These can smell like interference. Imagine if there were movements of barrel rise and / or true depreciation along these periods. Will Petrobras be able to pass fuel prices? How are private importers?
Finally, it seems to me that talking about reconciling shareholder and consumer interests is a mistake. The role of the President of Petrobras is to defend the interests of the shareholders only. The government has to look at consumers, and put in place public policies like, say, a diesel stabilization fund and a social tariff for gas cylinders, which keep Petrobras autonomous.
But the temptation to intervene and the absence of public policies separating the interests of the “Petrobras” shareholder government and the government concerned with society leads us to believe that mixed economy companies will never operate in Brazil.
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