December 19, 2012 / 9:43 AM / in 5 years

Rousseff to authorize Brazil fuel raise early next year-report

* 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 (Reuters) - 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 inflation.

Calls to press officials at the presidential palace and the Mines and Energy Ministry seeking comment were not immediately answered.

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.

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