[EN] Considerations about the current fuel crisis in Brazil

Observation to the reader: this blog is written in brazilian portuguese, but this post is in english because I wrote in this language on LinkedIn Pulse, where this article is originally published.

During the last four days, truck drivers from a lot of places in Brazil are refusing to work because of the current diesel oil prices. This held to a serious fuel crisis, with a general negative economic impact.

If you’re not informed about brazilian economy, you have to know that fuel prices in Brazil doesn’t flutuate freely. They’re controlled by Petrobras, a state owned and monopolistic company on national soil at oil extraction and refining industry.

To being able to explain the major cause of this crisis, we have to go back to the past, more precisely at the 2008-2014 period, when the government of that time maintained a bad price policy that caused a lot of financial losses to the company.

In a short explanation of this policy, price adjustments were made constantly a month later compared to international markets. At the time, the board of directors alleged they made this with the objective of reducing inflation’s impacts on the brazilian economy, something that later were considered illegal by investigation boards.

After the government’s change by Dilma’s impeachment process in 2016 and changes on the board of directors because of the corruption scandal revelation (the infamous “Car Wash” Scandal, which contributed to the current company situation aswell), Petrobras had to compensate its financial losses. The company made this by doing price adjustments, but now in consonance with the market trends, and this certainly had a direct impact on the diesel oil prices.

Other relevant factors, as the constant raise of USD/BRL exchange rates in a short space of time due to politics at a national and international level, has influenced this scenario too.

The increase of diesel oil prices is the main motivation for the lockouts along the country, with impacts on the whole supply chain.

This is causing a lot of problems in the country, as lack of crucial products and services because of logistics issues and high prices due to the low offer.

Until now, the federal government is without success at the negotiation with protesters and it remains unclear when the situation will return to normality.

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