Brazil Cuts Fuel Prices Ahead Of Lula’s October 25 Runoff Against Bolsonaro

Brazilian President Luiz Inacio Lula da Silva’s government has announced fresh fuel tax cuts and subsidies to contain rising petrol and diesel prices, just over two weeks before the October 25 presidential runoff against Senator Flavio Bolsonaro. The measures come amid higher global oil prices and concerns over inflation, fuel supplies and potential truckers’ protests.

Under a new decree announced on Friday, October 9, the government suspended federal taxes on gasoline imports and sales for 30 days, with a possible extension. It also extended an existing tax exemption on ethanol and increased subsidies for the biofuel. Diesel importers will receive an additional subsidy of 1.40 reais ($0.28) per litre for 30 days, on top of the existing support of 2.12 reais ($0.42) per litre.

The government said the measures were necessary to keep fuel imports economically viable as international refining margins for gasoline and diesel climbed to more than twice their pre-war levels. The fiscal impact will be offset by additional revenues from federal oil assets.

The relief package comes against the backdrop of the US-Israeli war with Iran, which began in late February and disrupted shipping through the Strait of Hormuz, a strategic waterway that previously carried roughly one-fifth of global oil supplies. Although Brazil produces and exports crude oil, it still relies on imports to meet domestic demand for refined fuels.

Fuel prices are politically sensitive because rising diesel costs increase transport expenses and can push up food prices. The government is also seeking to prevent truckers’ protests and a possible nationwide strike. In March, Brazilian truckers’ unions considered industrial action as diesel prices surged amid the Middle East conflict, warning that higher fuel costs were squeezing drivers’ earnings.

The concerns revive memories of the 2018 truckers’ strike, which paralysed parts of Brazil for about 10 days, disrupted deliveries, depleted supermarket shelves and petrol stations, and contributed to economic losses and food price increases.

The announcement comes after Flavio Bolsonaro, son of former president Jair Bolsonaro, received approximately two million more votes than Lula in the first round. Voters will decide on October 25 whether Lula secures a fourth, non-consecutive presidential term or Flavio Bolsonaro wins the presidency.