Competing with Hydrous Ethanol and CNG, gasoline currently fuels about 60% of all passenger vehicles in Brazil. For this reason, it is important the consumer know how this product’s market operates, from the producer to end consumer, and be aware of how its price is established.
The Brazilian gasoline market is currently regulated by the National Petroleum Agency (NPA) and by Federal Law 9478/97 (the Petroleum Act). This act flexibilized the oil and natural gas sector monopoly, until then held by Petrobras, opening the fuel market in Brazil. As such, in January 2002, gasoline imports were released and the price went on to be defined by the market itself.
When the consumer fills his or her car’s tank up at a retail service station, he or she purchases grade “C” gasoline, a mixture of grade “A” gasoline and Ethanol. The gasoline the refineries produce is pure, ethanol-free. Distributors buy grade "A" gasoline from Petrobras' refineries and Ethanol from the mills (Petrobras holds stakes in some of them). They blend these two products are blended to formulate grade C gasoline. The proportion of Ethanol in this blend is determined by the Interministerial Sugar and Alcohol Board (CIMA), and can range from 18% to 25% pursuant to Resolutions.
Grade "A" gasoline (Ethanol-free) can be produced by Petrobras, by other refineries in Brazil, by formulators, by petrochemical plants or, also, imported by companies authorized to do so by ANP. Sold to the several distributors that operate in Brazil, grade “A” gasoline is then mixed with Ethanol, resulting in grade “C” gasoline. This, in turn, is sold to consumers through thousands of service stations spread throughout Brazil.
The price that Petrobras practices to market grade "A" gasoline to distributors can be represented by the sum of two components: the share of the amount of Petrobras' product and taxes, which are levied by states (ICMS1) and the Union (CIDE2, PIS/PASEP3 and Cofins4).
In most States, ICMS is calculated based on an average weighted price for the final consumer (AWPFC), which is updated fortnightly. This means that the price at the retail service stations can be changed without any change having been made to the price Petrobras is responsible for.
At the price the consumer pays for grade "C" at the service station, in addition to the taxes and Petrobras' share, also included is the cost of Ethanol (which is set freely by its producers) and the distributors' and stations' costs and marketing margins.
By understanding that the gasoline pricing chain is composed of several different parts, it is easy to realize that any change made to at least one of them will reflect, upwards or downwards, in the price "C" grade gasoline consumers will pay at the pump. As it turns out, Petrobras only controls a portion of the final price to the consumer, represented by the price at its refineries without taxes.
There are cases in which Petrobras does not participate in the product’s trade chain, such as in the case of imported gasoline, or when it is produced by an agent other than Petrobras.
The NPA monitors the prices practiced by service stations all over the country via weekly surveys. The results can be checked out at the Agency’s website (www.anp.gov.br).
More information is available via e-mail, at email@example.com or by phone, by dialing 0800 728 9001.
1. Value-Added Tax on Services and Circulation of Goods - State Tax
2. Contribution for Intervention in the Economic Domain - Federal Tax
3. Social Integration Program / Public Service Employee Savings Program - Federal Taxes
4. Contribution to Social Security Funding - Federal Tax
The ICMS includes the part referring to the Tax Substitution, which is the value Petrobras collects for the sales operations from the distributors to the retail gas stations and from the stations to the final consumer.