* Source tells Valor hike may accelerate inflation
* Rise in fuel prices may offset lower power rates
* Price rise seen propping up Petrobras' finances
SAO PAULO, Dec 19 Brazilian President Dilma
Rousseff will increase local fuel prices at the pump early next
year, Valor Econômico newspaper reported on Wednesday, citing
unnamed government sources.
Valor declined to give an estimate of the potential price
hike. The sources told the newspaper that the increase in fuel
prices should offset an expected decline in electricity rates
slated for January.
Higher prices are crucial to state-controlled oil company
Petróleo Brasileiro SA's finances, which have struggled over the
past year in the wake of lower oil prices, stagnant output,
rising costs and a gap between local and international fuel
prices. The government kept the wholesale price for most fuels
steady for six years until June this year, in an effort to tame
Calls to press officials at the presidential palace and the
Mines and Energy Ministry seeking comment were not immediately
Petrobras, as the company is known, has for years
pushed to get the government to authorize price increases for
gasoline and diesel because now, to meet growing demand, it is
forced to import some of the fuels at market prices and then
sell them to customers at a loss.
In the first half of this year, the gap between the price of
Petrobras fuels in Brazil and what the company paid for fuel
imports led to losses in the company's refining and supply unit
of 11.6 billion reais ($5.6 billion.)
The government allowed Petrobras to raise the wholesale
price of gasoline and diesel in June, and diesel again in July.
These were the first such increases since September 2006,
according to Sindicom, Brazil's fuel retailers association.
According to analysts, fuel prices in Brazil are 20 percent
cheaper than international prices.