UPDATE 3-Petrobras raise Brazil fuel price, 1st since 2006
* Petrobras CEO says increase needed to fund plan
* Wholesale gasoline, diesel prices to rise June 25
* Gov't cuts fuel tax to prevent pump rise, inflation
* CEO Foster wins battle with ministers against hike
By Jeb Blount
RIO DE JANEIRO, June 22 (Reuters) - Brazil's state-led oil company Petrobras said on Friday it will raise gasoline and diesel prices for the first time since 2006, a move aimed at ending refining losses and paying for the world's largest corporate spending plan.
Petrobras will raise the wholesale price of gasoline by 7.83 percent and diesel by 3.94 percent effective June 25, the Rio de Janeiro-based company said in a statement sent to Brazil's securities regulator.
Without raising fuel prices, the company would be unable to pay for a $237 billion, five-year investment plan, Chief Executive Maria das Graças Foster said on June 15.
"The gap between fuel and crude prices was a financial drain on Petrobras and was a headache in the most recent quarterly financial results," said Ricardo Corrêa, oil and gas analyst at Ativa Corretora, a Rio de Janeiro stock brokerage.
"There was an urgent need to generate cash," he said.
Without the raise, fuel prices are between 20 and 25 percent below the level needed for Petrobras to stop losing money, according to Lucas Brendler, oil and gas analyst at Geração Futuro, which manages about $3 billion of stocks and bonds in Porto Alegre, Brazil.
The increase represents a victory for Foster and may confirm some analysts' expectations that she will improve Petrobras management by reducing political manipulation of its operations.
A career Petrobras employee who has worked closely with Brazilian President Dilma Rousseff, she was appointed chief executive of Brazil's largest company in January. She announced her first five-year plan last week, the company's largest ever.
Opposition to price increases within government was strong until only days ago with the anti-increase calls led by Finance Minister Guido Mantega, who is also chairman of Petrobras' board of directors. Energy Minister Edison Lobão also spoke out against an increase.
Lobão on June 13 said a recent fall in oil prices below $100 a barrel meant a fuel price increase was not possible this year. Brent crude oil, a benchmark for world prices, rose for the first time in five days Friday, rising 2.4 percent to $91.33 a barrel.
Mantega is concerned that price increases could hurt Brazilian growth. Disappointing economic data in the first quarter forced Mantega to cut his outlook for 2012 gross domestic product by more than a third, to 2.7 percent from 4.5 percent. Credit Suisse on Wednesday said Brazil's GDP will grow only 1.5 percent.
To prevent the fuel increase from hurting consumers, the government cut a key fuel levy known as CIDE to zero, which should offset the impact of the increase from the refinery at the gas station pump.
By selling fuel at a loss, Petrobras' refining division has racked up losses of 14.45 billion reais ($6.98 billion) in the 12 months ending March 31, an amount equal to nearly half the company's total profit in the period.
These losses threaten the company's ability to pay for a plan that commits it to spend an average of $130 million a day over five years and seeks to more than double output to 5.7 million barrels of oil and natural gas equivalent a day.
If Petrobras and other oil companies succeed in developing giant but complex deepwater resources near Rio de Janeiro and Sao Paulo, Brazil expects to become one of the world's four largest oil producers alongside Russia, Saudi Arabia and the United States.
Petrobras last raised its wholesale or refinery gate fuel price in September 2006, according to Alisio Vaz, president of Sindicom, the national association of fuel distributors.
The government, which owns a controlling stake in Petrobras, the only refiner in Brazil, has kept a lid on price increases for gasoline and diesel in the world's sixth-largest economy.
The fuels have a large weighting in Brazil's consumer price index. The government has struggled to control inflation in recent years and has prevented Petrobras from passing on rises in crude oil to consumers.
While national fuel prices languished, Brent crude prices have soared in recent years, reaching 128.40 a barrel on March 1, the highest price since oil reached an all-time high of $147.50 a barrel in August 2008. The Brent benchmark is the price Petrobras uses to book all sales, even to itself.
To prevent losses at Petrobras, the government has occasionally cut fuel taxes, most recently in November, allowing Petrobras to keep wholesale prices the same for distributors and boost revenue by keeping an amount equal to the tax cut for itself.
It also let Petrobras hold fuel prices steady when oil fell to $36.20 a barrel in late 2008, making up for losses when crude prices were higher.
Petrobras preferred shares, the company's most-traded class of stock fell 1.5 percent to 19.55 reais in Sao Paulo before the increase was announced.
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