UPDATE 1-Brazil diesel, gasoline demand jump with more vehicles, traffic

Thu Dec 19, 2013 2:34pm EST

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By Jeb Blount

RIO DE JANEIRO Dec 19 (Reuters) - Brazil diesel demand likely rose 4.3 percent in 2013, and gasoline demand 5.3 percent, as new vehicle sales and greater traffic congestion caused demand for fuels to grow faster than the overall economy, Brazil's fuel distributors' association said on Thursday.

"The market for fuel continues to outpace Brazilian growth by more than two percentage points," said Jose Luiz Oliveira, executive director of the association, known as Sindicom, told reporters in Rio de Janeiro.

"Not only has the vehicle fleet grown by about 8 percent, traffic congestion is growing in cities across Brazil and that has helped increase demand," he added.

Sindicom members account for 79 percent of Brazil's over-all fuel sales. Members include fuels retailers state-run oil company Petroleo Brasileiro SA or Petrobras, Royal Dutch Shell Plc., Cosan SA and BP Plc .

Diesel accounts for 47 percent of fuel sales, gasoline 33.2 percent and hydrous ethanol 8.5 percent.

After growing 7.5 percent in 2010, the highest in three decades, Brazilian gross domestic product growth slowed to 0.9 percent in 2012. Brazil is expected to grow between 2 percent and 2.5 percent this year, well below the 4 percent the government believes necessary for sustainable, low-inflation growth.

Fuel demand though has outpaced the overall economy as the government pumps cheap credit into the economy and cuts industrial taxes in a attempt to kick-start growth.

The government has also prevented Petrobras from raising prices in line with world prices, keeping the cost of gasoline and diesel artificially low and helping bolster demand.

Sindicom also said that demand for hydrous ethanol, a pure-ethanol fuel that is not mixed into gasoline blends, rose for the first time in four years, jumping 20 percent among Sindicom members to 7 billion liters.

Jet-fuel, or kerosene, fell 1 percent in 2013. Local airlines have scaled back domestic routes as a weaker Brazilian real against the dollar made their dollar-based aircraft leases and fuel costs more expensive.

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