Petrobras Joins Brazil Diesel Subsidy Program

Brazilian state-controlled oil producer Petrobras has approved its participation in a new government diesel subsidy program as authorities seek to limit the impact of elevated oil prices on consumers.

Petrobras said Saturday that its board authorized the company to join the program, which provides diesel producers with a subsidy of 1.00 Brazilian real ($0.19) per liter for an initial 30-day period. The measure can be extended for another 30 days.

The new support is cumulative with an existing diesel subsidy of 1.12 reais per liter, increasing the financial assistance available to producers as Brazil attempts to contain domestic fuel costs.

Earlier this week, Petrobras announced that it would raise diesel prices charged to distributors by an average of 1 real per liter. However, the company simultaneously introduced a discount of the same amount. That means Petrobras' effective diesel prices for distributors remain unchanged while the oil producer receives the government subsidy.

The company also disclosed that it received 448 million reais through a separate gasoline subsidy program covering sales made between July 16 and July 31.

Petrobras said accumulated government subsidies under programs covering diesel, gasoline and liquefied petroleum gas, or LPG, have now reached 9.9 billion reais.

Brazil has stepped up measures to shield consumers and businesses from higher energy costs since the start of the war in Iran, which has pushed global oil prices higher and increased pressure on fuel markets.

President Luiz Inacio Lula da Silva's government has sought to soften the domestic economic impact of those increases ahead of Brazil's presidential election in October. Lula is seeking a fourth non-consecutive term.

The latest Petrobras diesel subsidy adds to Brazil's broader fuel-price support strategy, aimed at limiting price increases at the pump while compensating producers for keeping domestic fuel costs under control.