Petrobras Brasileiro shares lower by 3% pre-market-- move attributed to WSJ story suggesting that Brazil will resist plan by PBR to adjust fuel prices
Article : Brazil Resists Petrobras's Plan to Adjust Fuel Prices
RIO DE JANEIRO--Brazil's government is resisting a plan by state-run oil company Petroleo Brasileiro SA (PBR, PETR4.BR), or Petrobras, to adjust local fuel prices because of its potential impact on already persistent inflation, the Folha de S.Paulo newspaper reported Tuesday. Petrobras is expected to present its plan for bringing local gasoline and diesel prices in line with international levels to the company's board Friday. Petrobras has seen its profits eroded in recent years because it sells expensive imported fuels at a loss in the domestic market. Brazil has been reluctant to pass along higher international prices to consumers because inflation, which is expected to end 2013 at 5.82%, is running above the central bank's 4.5% target. The government fears the plan, which would automatically raise or lower fuel prices based on a formula using foreign-exchange rates and international oil prices, could end up being used as a model for price indexing in other products across Latin America's largest economy, further inflaming inflationary pressures, Folha reported. Instead, the government is willing to raise gasoline prices 5% and diesel prices 10% this year, pushing the discussion about automatic adjustments into 2014, the newspaper said. Petrobras has said that it needs the regular fuel-price adjustments to ensure the company's revenues are sufficient to fund a $237 billion investment plan through 2017. Both Petrobras and a spokesman for President Dilma Rousseff declined to comment on the report.