* Petrobras has said for months that price rise needed
* Would boost margins for Petrobras, ethanol producers
* Gov't official says no decision yet, no deadline for one
BRASILIA, Jan 15 Brazil could announce as soon
as next week a 7 percent rise in gasoline prices and a 4 to 5
percent increase in diesel, daily newspaper O Estado de S. Paulo
reported on Tuesday.
The move would boost profit margins on fuel sales for
state-run oil producer and distributor Petrobras,
which has a huge distribution network through its 'BR' service
stations, and which has clamored recently for pump prices to
Though Brazilian officials in recent weeks have said a price
increase is forthcoming, a senior government source on Tuesday
told Reuters that a final decision has not yet been taken, and
that no timetable for a decision exists.
"The hammer hasn't come down on this one yet," the source
said. He added that the first news of any increase would have to
come via Petrobras because of its obligations to inform
shareholders of information significant to its operations.
Petrobras Chief Executive Maria das Graças Foster has spoken
repeatedly of the need to raise pump prices in recent months as
the company embarks on a $235-billion, five-year investment plan
to crank up oil output and expand domestic refining capacity.
At the government's urging, Petrobras has held pump prices
largely steady for about a decade to control inflation. It is
currently selling fuel at a loss due to higher international
prices for crude oil.
While rich in crude oil, Brazil still imports significant
volumes of refined fuel due to inadequate domestic refining
capacity. Gasoline imports by Petrobras surged 56 percent in
The Estado newspaper article did not cite sources, and press
representatives for Petrobras and Brazil's energy and finance
ministries declined to comment. Finance Minister Guido Mantega
told reporters in mid-December that fuel prices were certain to
rise at some point in 2013.
Preferred shares in Petrobras on Sao Paulo's
BMF&Bovespa stock exchange were hovering around the unchanged
mark by 1430 (1630 GMT).
Estado said the government could also restore the ethanol
mix in gasoline to 25 percent from a mandatory 20 percent at
present. Brazil's oil regulator said in October that the ethanol
blend would be raised to 25 percent by the end of June.
That would help dampen some of the inflation impact of a
fuel price hike as ethanol becomes cheaper after April with
increased supply. It would also allow Petrobras to improve its
bottom line by lessening the need to import gasoline.
Estado said the government was trying to find a way to
offset the inflationary impact of a rise in fuel prices, which
is one of its biggest misgivings over any increase.
Brazil's consumer inflation rate closed 2012 near the
ceiling of the government's target range despite an economy that
was barely growing, suggesting price pressure will get even more
intense if activity picks up as expected this year.
The government was considering cutting taxes known as PIS
and Cofins within the sector to prevent the full price increase
being passed on to the consumer, the article said.
Brazil has a huge sugarcane ethanol sector and it has been
increasingly vocal in its calls for gasoline prices to be raised
to enable ethanol prices to follow and relieve cash-strapped
mills whose margins have been squeezed by rising costs.
Despite ambitious plans to climb the ranks of the world's
oil producers in the coming years, Brazil is also a pioneer in
biofuel with millions of flex-fuel cars on its roads able to
burn either gasoline or ethanol or any mix of both.
Consumers switch at will from one fuel to the other
depending on which offers better value when they fill up.