* Wholesale gas price up 6.6 pct, diesel up 5.4 pct
* Follows steady pump prices since 2006
* Gov't has less room to insulate consumer prices
SAO PAULO, Jan 29 Brazil's state-run oil company
Petrobras will raise wholesale prices for gasoline
and diesel on Wednesday, bringing relief to its money-losing
refining and supply unit but threatening to accelerate inflation
amid weak economic growth.
Petrobras said in a market filing on Tuesday that it would
increase prices for gasoline and diesel by 6.6 percent and 5.4
percent, respectively, starting on Jan. 30.
Recent wholesale price increases have been offset by tax
cuts to insulate consumers, but the government is running out of
maneuvering room and may have to allow higher pump prices for
the first time in about seven years.
That could stoke inflation which was already running at a
one-year high in the 12 months through mid-January, raising
questions about how long the central bank can hold interest
rates at record lows to spur a sluggish recovery.
At the government's urging, Petrobras has held pump prices
largely steady since 2006 to control inflation. Global crude
prices have roughly doubled over that period, leading the
company to sell imported fuel at a loss.
The lost cash flow has dragged on the Petrobras' $237
billion investment plan, the world's largest corporate
investment program, as the company tries to reverse slipping
output and tap vast new offshore reserves.
As Brazil's economy has grown rapidly in recent years,
domestic demand for gasoline and diesel has outstripped
Petrobras' refining capacity, forcing it to import significant
volumes of refined fuel. Gasoline imports by Petrobras surged 56
percent in December.
Petrobras shares jumped nearly 4 percent on Dec. 19 when the
government said it would allow the company to raise fuel prices
in 2013. The stock closed 1.3 percent lower in Sao Paulo on
Tuesday at 19.11 reais, a nearly seven-week low.