The rise in fuel prices and the privatization of Brazil's Petrobras is the first task of the new Minister of Energy - Energy

The past 24 hours witnessed rapid developments due to the crisis of high fuel prices in Brazil, which prompted the president to dismiss the Minister of Energy in a new attempt to contain the situation, after the change of the head of the state company Petrobras.

Brazilian President Jair Bolsonaro announced the appointment of Adolfo Sachida as the new Minister of Mines and Energy, amid political tensions in the country; due to high fuel prices.

The first task of the new minister will be to discuss the privatization of the state oil company Petrobras, and to complete the privatization of the electricity company, Petrobras.

Fuel prices in Brazil
Brazil’s new energy minister, Adolfo Sachida – Photo by Reuters

Crises and challenges

Sachida takes over from former minister Bento Albuquerque, a retired admiral in the Brazilian Navy who has been in charge since Bolsonaro became president in 2019.

Albuquerque was fired because he resisted pressure to change Petrobras’ pricing policy, or provide significant fuel subsidies, Reuters reported.

Sachida has also been part of Bolsonaro’s government since January 2019, first as Minister of Economic Policy under Economy Minister Paolo Guedes, and then as his Senior Strategic Adviser.

Sashida said in a Twitter post that the new role will be the biggest challenge in his career.

“I thank President Bolsonaro for his confidence, Minister Guedes for his support and Minister Pinto for his work for Brazil… With so much work and dedication, I hope to rise to this challenge,” he said.

The fuel price crisis

Last week, Bolsonaro urged state oil company Petrobras not to raise fuel prices.

He attacked the company’s bumper profits as Brazilians faced a hike in gasoline prices, warning that the price hike would lead to “national unrest”.

Petrobras reported quarterly profit of about $9 billion, nearly 40 times more than the same quarter the previous year.

On Monday, Petrobras raised diesel prices by 9%, saying the increase was in line with its policy of tracking global prices.

The company said – in a previous statement it issued -: “After oil prices were seen at consistently high levels, it has become necessary to adjust prices, as supply continues in the Brazilian market, without risk of shortage.”

Fuel prices in Brazil
Brazilian President Jair Bolsonaro – Photo by Reuters

political calculations

Bolsonaro previously said he does not have the power to step in and cut fuel prices drastically; Because Petrobras does not have enough refining capacity to be a price maker.

Bolsonaro fired Petrobras’ chief executive in April, replacing him with a staunch defender of market rates.

However, Albuquerque has been seen as a bulwark against political interference in the company, a particularly acute threat, with inflation becoming a central issue in this year’s presidential election.

Bolsonaro’s biggest rival is former leftist President Luiz Inacio Lula da Silva, and two opinion polls published on Wednesday showed that Lula is making gains for the first time this year, continuing his lead over Bolsonaro.

Albuquerque and sacked Petrobras CEO, retired Army General Joaquim Silva e Luna, are two recent examples of former military officers in Bolsonaro’s government being pushed aside as he prepares for the October elections.

Privatization of Petrobras

The new Energy Minister, Adolfo Sachida, announced that he will request studies on the privatization of Petrobras, in his first job in his position, according to what was reported by Reuters.

In his first address to the media, Sashida said: “I am requesting the start of studies pending the proposal of legislative changes necessary for the privatization of Petrobras.”

He also stressed that it is necessary to continue the process of privatizing the electricity company Eltrobras, in reference to attracting capital to Brazil.

Sachida said he would ask Economy Minister Paulo Guedes to include Pre-Sal Petroleum, the state-run company that oversees the country’s oil and gas production-sharing contracts, in the national privatization program “to assess its alternatives to privatization.”

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