Petrobras proposes new fuel-pricing mechanism to lift company’s bottom line

Brazil’s state-owned Petroleo Brasileiro (Petrobras) has proposed a new fuel-pricing mechanism aimed at reducing the company’s massive debt load.
Petrobras has been selling imported fuels at a loss in the domestic market because the company does not automatically pass along higher international prices to consumers at the pump.
“Price adjustments under the new mechanism will not require approval by the company’s management or the board,” said Petrobras Chief Financial Officer Almir Barbassa. “They will be made automatically.”
The new methodology will establish parameters to adjust fuel prices up or down based on factors such as foreign-exchange rates and international oil prices. Petrobras’ board has requested additional studies about the new pricing mechanism, which the company will present to the board on Nov. 22.
Petrobras has borrowed heavily to fund its USD237 billion in planned investments through 2017 because revenues are falling short of initial projects, amid heavy fuel imports and stagnant crude-oil production.
The proposed changes to the pricing mechanism for gasoline and diesel fuel will give the company a better idea about incoming revenues used to plan investments, he said.
“With greater foresight, there should be a decrease in our debt to more adequate levels, levels that are more compatible with our investment plan,” he added.
Brazil’s government, however, is reluctant to allow Petrobras to raise fuel prices for fear of sparking inflationary pressures.