Brazil’s Lula Moves to Cut Fuel Prices Ahead of Presidential Election

Brazilian President Luiz Inacio Lula da Silva on Wednesday signed a decree and a provisional measure to lower fuel prices, as rising global crude costs threaten to push up domestic prices weeks before the country’s presidential election.

Lula, seeking a fourth non-consecutive term, faces a challenge from Senator Flavio Bolsonaro, son of former president Jair Bolsonaro, in the October election. Fuel prices remain a politically sensitive issue for Brazilian voters.

The measures come as Brent crude prices climbed above $100 a barrel on Wednesday for the first time since July. Attacks on oil facilities and ships in the Middle East have heightened concerns over global supplies and disrupted an already strained supply chain.

“We're not going to allow this irresponsible war to hit your pocket,” Lula said while signing the measures, which build on policies introduced after the outbreak of the US-Iran conflict.

Under the new measures, taxes on the import and sale of ethanol, gasoline and gasoline blends will be reduced for 30 days, from September 10 to October 9. Aviation gasoline is excluded. A separate provisional measure authorises a R$1 ($0.19) per litre subsidy for producers and importers of road diesel.

Brazil is a major crude oil producer and exporter and has benefited from higher international oil prices. However, it remains dependent on imports to meet domestic demand for refined fuels, leaving local prices vulnerable to global market movements.

Diesel prices are particularly important because higher costs can trigger truckers’ protests and raise food prices. A major truckers’ strike in 2018 disrupted fuel supplies and food distribution, causing significant economic losses.

Economist Armando Castelar Pinheiro said the measures have a “significant electoral component”, arguing that subsidies could have been smaller without the election approaching.

An Itaú BBA analysis cited by Brazilian media said diesel prices are currently 28 per cent below international levels, while gasoline is 21 per cent cheaper.