Petrobras Chairman, Management Said Split on Gasoline Price Cuts

  • Refining head said to back fuel price cuts to boost sales
  • Producer currently sells gasoline at 32% premium, BofA says

Petrobras Chairman Nelson Carvalho has opposed a management proposal to reduce the price of gasoline in a bid to boost sales, said a person familiar with the discussions.

Jorge Celestino, the head of refining, proposed a price cut at a time Petrobras is losing market share, said the person, who asked to remain anonymous because the discussions aren’t public. Chief Executive Officer Aldemir Bendine wrote a letter to the board Monday saying no decision has been made and the company will continue to debate which is the most favorable price level for the company, said the person. Globo newspaper previously reported the fuel price discussions.

A price cut at the world’s most indebted oil producer would come as President Dilma Rousseff is facing an impeachment battle in Congress. In his letter to the board, Bendine rejected any speculation that the price debate was driven by political considerations, said the person. While the company can reduce prices without board approval, historically the board has weighed in on any adjustments. The stock fell 9.3 percent to 7.58 reais at close in Sao Paulo on Monday.

While the company is always assessing the competitiveness of its commercial policies, there are no plans in place to cut fuel prices, Petrobras said in a regulatory filing.

Carvalho’s position marks a shift at the oil producer’s board, which consistently opposed price increases when it was led by former finance minister Guido Mantega during the commodities boom. Petroleo Brasileiro SA, as it is formally known, lost tens of billions from 2011 through 2014 when it was selling imported gasoline and diesel at a loss to help Rousseff’s administration contain price growth.

"Fuel prices are always a sensitive topic given Petrobras’s history on fuel subsidies," Edmar Almeida, an energy specialist at the Rio de Janeiro Federal University, said by phone. "There is no doubt that cheaper gasoline would be good news for the government. But it could also be an honest move to recover market share from ethanol."

Expensive gasoline has made ethanol more competitive in a country where a majority of vehicles run on both fuels. Petrobras last adjusted fuel prices in September, increasing gasoline by 6 percent and diesel by 4 percent.

Gasoline and diesel currently sell at premiums of 32 percent and 67 percent, respectively, compared to international reference prices, Bank of America Corp. said in a note to clients Monday.

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