The new CEO of Brazil's state-controlled oil company Petrobras said the company needs to raise fuel prices to keep in step with higher oil prices, while maintaining the practice of buffering pump prices to shield consumers from short-term volatility.
In an interview with Brazil's Estado de Sao Paulo newspaper less than two weeks into the job, Maria das Gracas Foster emphasized the importance of increasing domestic refining capacity to reduce Brazil's exposure to price fluctuations on international oil markets, Reuters reported.
Brazil's government has held the price of gasoline for drivers largely stable for the past eight years. Petrobras benefits when oil prices fall below the relative price level the government has set, but loses when world oil prices climb above the levels on the domestic market, forcing losses on the company, which has to import fuel to fill unmet local demand.
"Bringing all this volatility in real time to the consumer is impracticable. It's absurd to think that this could happen," Foster said.
But she said there was a need to raise the level of fuel prices for consumers, even if they still did not follow the peaks and troughs of global oil prices.
"Is there a need to pass on the price (rise)?" she asked. "There is.
"It's necessary to pass it on. The gap between international prices and national prices is widening. This difference is quite pronounced and the effects are greater on Petrobras," she said.
Fast-rising domestic fuel consumption has increased the company's reliance on imports of refined oil products even as its own crude output rises. Petrobras' national production now stands at roughly 2 million barrels per day.
Petrobras, the world's No. 5 integrated oil company by market value, is in the middle of a $225 billion expansion plan. The company is looking to nearly triple output to more than 6 million barrels of oil a day by 2020, which could help Brazil challenge the United States for the role of No. 3 oil producer after Russia and Saudi Arabia.
In the interview, Foster described herself as an "extremely anxious" and demanding manager, an image she has cultivated in a career of more than 30 years at the company.
Foster said it was not Petrobras' role to control inflation by the prices it sets and dismissed the idea that the company was pressured to operate in a way that gave precedence to the government's macroeconomic goals rather than those of investors.
"This vocation of correcting inflation, to contain inflation is not the vocation of Petrobras. Full stop," Foster said.
Brent crude rose to a nearly 10-month high of $125 a barrel on Friday as financial sanctions on Iran pushed Iranian oil buyers in Europe and Asia to seek supplies from elsewhere.
Noting Friday's spike, Foster said it was important to take a broader view of the average level of oil prices in any adjustment the company made, pointing to a more typical recent average of $100 to $110 dollars a barrel.
At the heart of Brazil's huge oil ambitions are the vast subsalt reserves it discovered off its southeastern coast in 2007 that are estimated at more than 50 billion barrels, but are buried deep several miles below the ocean surface, under a thick layer of salt rock, creating new technical challenges.