Page 9 - AsianOil Week 20 2022

AsianOil COMMENTARY AsianOil

truckers. As a group, these truckers wield con- against leftist candidate Luiz Inacio da Silva.
siderable influence, and they are outraged at the
NOC Petrobras’ decision earlier this month to Asia
increase domestic diesel prices to keep them Across the Pacific, lockdowns in China have
more or less in line with world market trends. offered something of a reprieve to diesel and jet
This stance is understandable from a polit- fuel markets, dampening demand at a time when
ical perspective, but the truckers have threat- the war in Ukraine and sanctions on Russia have
ened to stage a national strike and mount road caused jet fuel prices to spike. However, there
blockades on May 21 to express their discon- have been warnings that as Chinese lockdowns
tent. If these protest actions continue beyond eventually ease and demand rebounds, Russian
May 21, they have the potential to wreak great supply will decline further and prices can be
havoc on the Brazilian economy, which is still expected to rise higher still.
working to recover from the ravages of the The surge in jet fuel prices – up more than
pandemic. This is not a theoretical matter, as 50% so far this year – has come as more and
it has happened before. Many Brazilian voters more Asian countries are lifting pandemic-re-
still have vivid memories of the 10-day truck- lated travel restrictions. It threatens to under-
ers’ strike in 2018 that ended up paralysing the mine the impact of this reopening for airlines.
country for weeks. There are some bright spots, such as new
Bolsonaro, of course, is taking the truckers’ refining capacity coming online in Asia fol- With many
side – and taking Petrobras to task for raising lowing delays that have been attributed to the
prices, even though the company is not required pandemic and to weak refining margins. The refiners (at least
to take the government’s policy considera- situation has now changed, with Asian refiners outside China)
tions in mind when setting tariffs. He has also reported to be reaping record profits in recent
replaced the state-owned company’s CEO and weeks as the region also ramped up exports to already running
appointed a new cabinet member to head the Europe in a bid to help replace a shortfall of Rus-
government department following the resigna- sian fuel. at full capacity,
tion of Mines and Energy Minister Bento Albu- However, with many refiners (at least outside
querque. Additionally, Albuquerque’s successor China) already running at full capacity, there is there is limited
Adolfo Sachsida has started talking about the limited potential to ramp up fuel production as potential to
possibility of privatising Petrobras – apparently demand continues to rise. China is an exception
because the president is tired of being blamed as lockdowns there persist. Refinery through- ramp up fuel
for its unpopular decisions and not just because put in the country was down 11% year on year
a sell-off might improve its performance. in April and had fallen to its lowest level since production.
These developments all but guarantee that March 2020. (See: Chinese refinery throughput
Petrobras’ fate and pricing will be part of the down amid lockdowns, page 13) Chinese refin-
discussion in the run-up to Brazil’s presiden- ery output can thus be anticipated to rise as
tial election. The discussion is likely to be spir- lockdowns in that country ease – but so too can
ited, as Bolsonaro, a right-wing populist who the country’s domestic fuel demand, and thus
has moved away from his earlier statements the potential to ease the looming fuel supply
in favour of market economics, is running crunch remains limited.™

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