Brazilian President Signs Decree to Lower Fuel Prices

Brazilian President Luiz Inacio Lula da Silva signed a decree and a temporary measure on Wednesday aimed at lowering fuel prices, weeks ahead of the presidential elections and as the war between the United States and Iran drives up the cost of filling car tanks.

Fuel costs are a particularly sensitive issue for voters, who will decide in October whether to grant Lula a fourth non-consecutive presidential term or elect Senator Flavio Bolsonaro, son of former President Jair Bolsonaro.

The price of Brent crude, the global benchmark for oil prices, surpassed $100 on Wednesday for the first time since July, after attacks on oil facilities and ships in the Middle East threatened to further strain an already fragile supply chain.

Speaking while signing the measures, which extend fuel price control policies implemented at the outset of the US-Iran war, Lula said, “We will not allow this irresponsible war to hit your pockets.”

The measures announced on Wednesday include a reduction in taxes on the import and sale of ethanol, gasoline, and gasoline blends, excluding aviation fuel, for a period of 30 days from September 10 to October 9. The temporary measure also authorizes a subsidy of one Brazilian real ($0.19) per liter for producers and importers of diesel fuel used in road transport.

Crude oil prices surged sharply shortly after Israel and the United States began their war with Iran in late February, largely because the fighting halted most shipping traffic through the Strait of Hormuz, a narrow waterway through which about one-fifth of global oil supplies passed before the conflict.

Brazil is a major producer and exporter of crude oil, and its revenues from this sector have risen significantly this year due to higher global prices. However, the country still relies on imports to meet domestic demand for refined fuels.

Stable diesel prices are also crucial to avoiding truck driver strikes and keeping food price inflation in check. In 2018, a truck drivers’ strike caused a sharp rise in food prices, led to shortages of goods on store shelves and at gas stations, and resulted in billions of dollars in losses, highlighting the power of organized truck drivers.

Former President Jair Bolsonaro, then a parliamentarian and months away from winning the presidential election, was one of the most prominent supporters of the truck drivers, who later became an important electoral base for him.

Armando Castellar Pinheiro, an economics professor at the Federal University of Rio de Janeiro, said the Wednesday measures “have a significant electoral component.” He added that, absent the political calendar, “there would have been some support, but it would likely have been lower.”