Page 9 - NorthAmOil Week 20 2022

NorthAmOil COMMENTARY NorthAmOil

truckers. As a group, these truckers wield con- favour of market economics, is running against
siderable influence, and they are outraged at the leftist candidate Luiz Inacio da Silva.
NOC Petrobras’ decision earlier this month to
increase domestic diesel prices to keep them Asia
more or less in line with world market trends. Across the Pacific, lockdowns in China have
This stance is understandable from a polit- offered something of a reprieve to diesel and jet
ical perspective, but the truckers have threat- fuel markets, dampening demand at a time when
ened to stage a national strike and mount road the war in Ukraine and sanctions on Russia have
blockades on May 21 to express their discon- caused jet fuel prices to spike. However, there
tent. If these protest actions continue beyond have been warnings that as Chinese lockdowns
May 21, they have the potential to wreak great eventually ease and demand rebounds, Russian
havoc on the Brazilian economy, which is still supply will decline further and prices can be
working to recover from the ravages of the expected to rise higher still.
pandemic. This is not a theoretical matter, as The surge in jet fuel prices – up more than
it has happened before. Many Brazilian voters 50% so far this year – has come as more and
still have vivid memories of the 10-day truck- more Asian countries are lifting pandemic-re-
ers’ strike in 2018 that ended up paralysing the lated travel restrictions. It threatens to under-
country for weeks. mine the impact of this reopening for airlines. With many
Bolsonaro, of course, is taking the truckers’ There are some bright spots, such as new
side – and taking Petrobras to task for raising refining capacity coming online in Asia fol- refiners (at least
prices, even though the company is not required lowing delays that have been attributed to the outside China)
to take the government’s policy considera- pandemic and to weak refining margins. The
tions in mind when setting tariffs. He has also situation has now changed, with Asian refiners already running
replaced the state-owned company’s CEO and reported to be reaping record profits in recent
appointed a new cabinet member to head the weeks as the region also ramped up exports to at full capacity,
government department following the resigna- Europe in a bid to help replace a shortfall of Rus-
tion of Mines and Energy Minister Bento Albu- sian fuel. there is limited
querque. Additionally, Albuquerque’s successor However, with many refiners (at least outside potential to
Adolfo Sachsida has started talking about the China) already running at full capacity, there is
possibility of privatising Petrobras – apparently limited potential to ramp up fuel production as ramp up fuel
because the president is tired of being blamed demand continues to rise. China is an exception
for its unpopular decisions and not just because as lockdowns there persist. Refinery through- production.
a sell-off might improve its performance. put in the country was down 11% year on year
These developments all but guarantee that in April and had fallen to its lowest level since
Petrobras’ fate and pricing will be part of the March 2020. Chinese refinery output can thus
discussion in the run-up to Brazil’s presiden- be anticipated to rise as lockdowns in that coun-
tial election. The discussion is likely to be spir- try ease – but so too can the country’s domestic
ited, as Bolsonaro, a right-wing populist who fuel demand, and thus the potential to ease the
has moved away from his earlier statements in looming fuel supply crunch remains limited.™

Week 20 19•May•2022 www. NEWSBASE .com P9