RIO DE JANEIRO, May 15 — Weaker-than-expected earnings at Brazil’s state-run oil firm Petrobras PETR4.SA drew criticism on Tuesday from industry groups of a pricing policy that has kept fuel costs in Brazil more stable than in the international market for much of the past year.

Petrobras shares traded about 1.4 per cent lower in Tuesday trading after the company reported a 38 per cent drop in its first-quarter results to 23.9 billion reais (US$4.66 billion), missing analyst forecasts.

After years of frequent price updates to follow global markets, Petrobras enacted in May 2023 a new pricing policy cheered by Brazilian President Luiz Inacio Lula da Silva, who has pushed the firm to keep down pump prices as part of its mandate to serve the country.

In December, the government also increased the required biodiesel blend into diesel to 14 per cent from 12 per cent.


Both changes have hurt earnings at Petrobras, said Evaristo Pinheiro, president of Refina Brasil, an industry group representing private refineries. From last May to March 2024, the firm could have booked an extra 9 billion reais in revenue if it had sold fuel at parity with international markets, said Pinheiro.

In just the first quarter of this year, the disparity cost Petrobras about 3.5 billion reais in foregone revenue, according to Sergio Araujo, president of Brazilian fuel importers association Abicom.

“One thing that is a consensus is that the prices of diesel and gasoline should be adjusted,” said Aldren Vernersbach, an economist at the Federal University of Rio de Janeiro focused on the oil and gas sector.


Petrobras sales director Claudio Schlosser told journalists on an earnings call that the company is not holding down fuel prices, but rather acting upon its commercial strategy.

In a call with analysts, Petrobras’ Chief Financial Officer Sergio Leite confirmed the impact of the biodiesel blend on the firm’s results. He also said lower profit margins were due to pressure from Russian diesel arriving in the Brazilian market.

Leite said the firm constantly assesses its commercial strategy, and that current fuel prices allow it to remain profitable.

Petrobras said in a Monday release that the weaker earnings were mainly due to lower sales, a drop in oil prices and a slimmer profit margin for diesel sales compared to the end of 2023. The company also blamed a weaker exchange rate. — Reuters