Cost of living in Brazil: domestic gas prices, gasoline, and ethanol rise and affect the income of Brazilian citizens

According to the newspaper Folha de S.Paulo, Petrobras readjusted today "the price of cooking gas by about 5%". According to the newspaper, the price increase is valid for all types of LPG (liquefied petroleum gas), which includes domestic (for cooking) and industrial gas.

This is the fifth increase in domestic gas in 2019. The last was on November 25, when Petrobras (PETR3; PETR4) readjusted the domestic gas cylinder price by 4%.

According to a survey by the National Agency of Petroleum, Natural Gas and Biofuels (ANP), in the early days of December, in Belo Horizonte, Minas Gerais, the price of cooking gas rose twice the inflation measured by the IPCA.

Already the price of ethanol in the pumps of gas stations in Brazil is the highest in the last six years. To make matters worse, the price of gasoline has also skyrocketed. Thus, fuel readjustments make life harder for Brazilians this holiday season.

Petrobras (PETR3;PETR4) announces the discovery of new natural gas fields in Sergipe and Alagoas

Petrobras discovered 6 natural gas fields in Sergipe and Alagoas. The expectation is that it will be possible to extract 20 million cubics of gás meters per day. This is the equivalent of 1/3 of Brazilian production today.

According to a report published on Sunday (16.Jun.2019) by the newspaper O Estado de S.Paulo, consultancy Gás Energy estimates that the exploration of these fields should result in R$ 7 billion in annual revenue for the oil company and its members.

These fields have placed the State of Sergipe on the world natural gas route. In five years, the state alone must move 40 million cubic meters per day of gas, a volume that corresponds to more than four times the current consumption capacity of the entire Northeast Region of Brazil.

Paradoxically, Petrobras announced this discovery days after the Federal Supreme Court (STF) has released the sale of state-owned subsidiaries without legislative approval, mainly the Associated Gas Company (TAG). The Court also dismissed the need for bidding. It is possible that Petrobras already had information about the discovery before approval.

According to journalist Luis Nassif, "a mere survey of the last few episodes proves the scandalous articulation surrounding the burning of public assets." For Nassif, "it is evident that the giant discovery completely changes the calculations on the Internal Rate of Return of TAG."

Luis Nassif believes that minority shareholders in Brazil should sue Petrobras for potential losses from this strange coincidence in the near future.

Petrobras (PETR3;PETR4) changes its pricing policy, which will no longer have periodicity for readjustments

Petrobras announced last night that, from now on, the price adjustments of diesel and gasoline practiced by the company in Brazil will be carried out without defined periodicity. In practice, Petrobras will be able to adjust fuel values in Brazil at any time, depending on the price of a barrel of oil in the international market and the exchange rate variation.

The company also announced a 4.6% reduction in the average price of diesel in its refineries, to R$ 2.0664 per liter, as of today (13.Jun.2019).

The company had also announced, on June 11, 2019, that it would reduce the average gasoline price by 3% in its refineries. This was the second drop in the price of gasoline in the month, on June 1, Petrobras reduced the price of gasoline by 7.16%.

The problem is that the fall in the price of fuel or delay or not reaches the gas stations where people fuel their vehicles.

Caixa will sell R$ 7.2 billion in Petrobras shares

Caixa, a state-owned Brazilian bank, will sell 241.3 million shares of Petrobras, equivalent to 1.85% of the company's capital. The transaction will involve only common shares, which give voting rights to the shareholders in the meeting  (Caixa holds a 3.2% share of these shares). Of the total moved, R$ 7 billion will be with the bank. The gain estimate was made based on the share price on June 7, when the papers were traded at R$ 29.75. The offer will involve distribution in Brazil and abroad in the form of American Depositary Receipts (ADRs).

It is positive for Caixa Econômica to sell the shares. The main business of this state-owned bank is not to buy shares but to finance the construction and purchase of own houses for Brazilians. The decision also satisfies the new government, which intends to privatize parts of Petrobras after the STF's positive decision in that regard.

However, due to the adjusted balance sheets, where the currency hedge account only increases, one day this will have consequences. The Securities and Exchange Commission of Brazil (CVM), the securities market authority in Brazil, has not yet explained what will be the deadlines for companies with Petrobras to settle such an account. The minority shareholders still do not know the position of Petrobras in this regard.

One-fifth of Brazilian families use coal to cook food because of pricing policy for household gas of Petrobras

According to a survey published by the IBGE (Pnad Contínua), the impoverishment of the population produced by the prolonged economic crisis combined with rising unemployment and the price of LPG (Liquefied petroleum gas) cylinder led one-fifth of Brazilian families to use firewood or charcoal for cooking. Today, 14 million households prepare food in this way, an increase of 27 percent or three million homes between 2016 and 2018. In the Southeast fo Brazil, growth was 60 percent.

Meanwhile, Petrobras maintains a more expensive price for cooking gas than the one practiced internally since 2018 to recover losses that the company has had in recent years. It is a monopoly that harms the Brazilian people for the benefit of foreign and Brazilian investors.

Unfortunately, this pricing policy of Petrobras is driving the poorest classes in Brazil to return to using firewood to make food. A return to the Middle Ages. It is a country where the "modernity" of the "market prices" practiced by Petrobras forces the use of firewood and coal.

In Brazil, the readjustments in the price of LPG (liquefied petroleum gas) practiced by Petrobras are quarterly and consider international price averages and the exchange rate in previous quarters. It is this policy that led thousands of Brazilians to cook between soot and smoke.

Petrobras profits down 42% in the first quarter of 2019

Petrobras closed the first quarter of 2019 with a profit of R$ 4 billion, 42% lower than the same period of 2018. The declines in oil and gas production coupled with interventionist actions by the government of Jair Bolsonaro were the main reasons for the performance lower than the first quarter of 2018.

The performance of the first quarter of 2019 again showed a mismatch between the projections made by economists and banks earlier this year and the economic reality of the country. For example, projections from six banks indicated early in 2019 that Petrobras would make a profit of around R $ 5.6 billion in the first quarter of 2019.

Many oil industry experts also point to Petrobras' worrisome high-debt expert, 3.1 times the company's cash generation. Currently, Petrobras' indebtedness stands at R$ 372.2 billion.

Petrobras said one of the main reasons for the drop in profit was the shutdowns in production for the maintenance of the platforms. According to the company, production is expected to return to normal in the coming months.

Bolsonaro's government decides to interfere in fuel prices

Petrobras had announced that the average liter value of the fuel would rise 5.74% from today. However, the government of President Jair Bolsonaro, who until then claimed to be liberal in the economy, prohibited that the increase was applied.

The government fears a new strike by truck drivers like the one that stopped the country in 2018.

According to analysts, this measure hinders the work of reduction of debt and sale of assets made by Petrobras in recent years. The interference, very similar to the one made by the Dilma Rousseff government, can greatly harm the health of Petrobras. Petrobras' stock prices are expected to reflect this interference negatively. This should also drive the performance of the financial market in Brazil today and in the coming days.

In addition, the government also waved at the possibility of creating a tax on all financial transactions in Brazil. This should also be not welcomed with many criticisms of the Brazilian financial market.

The promise to reduce taxes made during the campaign of Jair Bolsonaro to the presidency generated many expectations in the Brazilian financial market. If the new tax is presented by the current government, the tendency is for the Brazilian financial market to take a more critical stance on the government.

Paulo Guedes, Brazil's Economy Minister, promises to halve the price of gas

During a meeting of mayors nationwide, held yesterday in Brasilia, the Brazilian capital, Economy Minister Paulo Guedes promised that the current government will implement a plan called "cheap energy shock." According to him, by ending Petrobras' monopoly in this sector and encouraging competition, the price of gas will be halved.

At the same meeting, Guedes said he will reduce the number of taxes in the country and create a Single Federal Tax.

According to the National Union of Liquefied Petroleum Gas Distributors (Sindigas), six companies account for almost 90% of the distribution market in Brazil. In the previous management of Petrobras, during the Michel Temer government, the sale of 90% of the shares of Nova Transportadora do Sudeste (NTS) and the sale of 49% of the subsidiary Gaspetro was completed.

Currently, Petrobras is responsible as a concessionaire for 75% of the gas produced and for 96% as an operator.

Brazil currently consumes about 100 million cubic meters of natural gas per day, only 4% of households in the country use piped gas. The other 96% is divided between wood stoves, gas canisters and other alternatives.