Brazil's fuel market rattled by price surge as Petrobras cancels auctions and distributors fear shortfall

Brazil's fuel market has been thrown into turmoil by the ongoing conflict in the Middle East, with gasoline and diesel prices hitting fresh highs, state-owned oil company Petrobras suspending fuel auctions and distributors raising alarms over potential supply shortfalls.

The government also said it will remove the federal PIS/Cofins levy on diesel imports and sales in response to rising oil prices linked to the conflict. The step is expected to reduce pump prices by BRL0.32 ($0.06) per litre. Authorities said producers and importers will also receive a subsidy of the same value, which would bring total relief to BRL0.64 per litre for consumers, Argus reported.

Petrobras and the country’s oil and gas regulator ANP have dismissed shortage fears, while gasoline prices in Brazil are rising fast.

The average price of gasoline in Brazil rose for the second consecutive week to BRL6.46 ($1.23) per litre in the period from March 8 to 14, according to the ANP, as quoted by Estadao.

This compares with BRL6.30 the previous week and BRL6.28 at the end of February, marking the steepest increase since hostilities broke out.

The highest price recorded was BRL9.29 per litre in the state of São Paulo, while regular petrol averaged BRL6.28 nationwide. In Acre, prices leapt from BRL7.97 to BRL8.19, with the entire northern region posting the country's highest averages.

Among northeastern states, Bahia and Rio Grande do Norte registered averages above BRL6.90.

Diesel has also surged sharply. Despite government efforts to bring pump prices down, the national average climbed from around BRL6.03 at the end of February to BRL6.80 last week. São Paulo averaged BRL6.78 per litre, while Bahia, Pará and Tocantins all exceeded BRL7.

In response to the rapid price increases, ANP launched field inspections at filling stations across nine states and the Federal District, Valor reported.

Operations are taking place in Amazonas, Bahia, the Federal District, Mato Grosso, Minas Gerais, Pará, Paraná, Rio de Janeiro, Rio Grande do Sul and São Paulo, with the agency working in conjunction with consumer protection bodies Senacon and state and municipal Procons.

"The actions are focused on collecting prices at gas stations for analysis by the agency regarding possible abusive prices," ANP said, adding it would also verify fuel quality and the quantities dispensed by pumps.

Both Petrobras and the ANP moved to quell market concerns over possible supply disruptions after reports circulated that diesel was running short in some regions, according to Valor.

"ANP continues to continuously monitor the regulated market, including daily tracking of diesel stocks," the regulator said. "To date, the agency has not identified any restrictions on maintaining operations or on the availability of fuels in the domestic market, considering the country's usual supply sources."

Petrobras stated separately that fuel deliveries from its refineries to distributors were proceeding as planned.

Despite those assurances, fuel distributors remain deeply uneasy following Petrobras's suspension of diesel and gasoline auctions scheduled for the week of March 17, Valor reported.

The company said it was "evaluating the scenarios" linked to the continuation of the Middle East conflict and would provide updates at the appropriate time, without specifying a reason for the cancellations.

Petrobras sells fuel at these spot auctions at international market prices — above its contracted refinery gate prices — to meet distributor demand beyond volumes already agreed under long-term contracts.

The National Union of Fuel and Lubricant Companies (Sindicom), which represents the country's major distributors, planned to send formal letters to the ministry of mines and energy and ANP warning of the risk of shortfalls.

Industry associations Brasilcom and Fecombustíveis said they had not yet received reports of actual supply problems from members, even as isolated shortage reports circulated in some parts of the country.

A source in the distribution sector warned of the bind created by the suspension. Without the auctions, distributors cannot guarantee supply to their networks, the source said, stressing that Petrobras needs to continue acting as the structural supplier to the domestic market.

The auction suspensions come at a particularly sensitive moment, as private fuel imports have contracted sharply in the face of the war-driven surge in international oil prices, Folha de S. Paulo reported.

Industry sources told the newspaper that supply for March remains secured but import volumes for April will be minimal.

Petrobras, which produces around 70% of the diesel consumed in Brazil, had been expected to auction 95mn litres of gasoline and 70mn litres of diesel — small volumes equivalent to around 3% and 1.4% of April 2025 sales respectively — but these are considered significant by distributors given the collapse in private-sector import activity.