Page 7 - DMEA Week 20 2022

DMEA DMEA

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

Week 20 19•May•2022 www. NEWSBASE .com P7