Brazil’s government will phase out its diesel subsidy more gradually than its gasoline subsidy, aiming to avoid price shocks and fuel supply disruptions despite falling global oil prices.
Planning and Budget Minister Bruno Moretti said the government would remove the gasoline subsidy of around £0.06 per litre within days. However, the larger diesel subsidy, worth approximately £0.15 per litre, will be withdrawn over a longer period to give the market greater stability.
Speaking to Reuters, Moretti said: “the diesel market has the predictability needed to operate and supply society.”
The government believes a rapid removal of diesel support could trigger a sharp increase in fuel prices because the recent fall in crude oil prices has not yet been fully reflected at the pump.
Brent crude, which surged above $118 per barrel during the Middle East conflict earlier this year, was trading at around $71.50 per barrel on Thursday.
Brazil is also reviewing a 12% export tax on crude oil introduced in March. Moretti said the current rate is unlikely to remain in place, with the government considering either ending the measure when it expires next week or reducing the tax through an administrative decision.
The subsidy programme has been funded using extraordinary oil revenues, allowing the government to maintain its fiscal neutrality goals.
Brazil’s government expects to remain on course to achieve its fiscal target of a primary surplus equal to 0.25% of gross domestic product this year, despite ongoing pressure from mandatory public spending.
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