The measures adopted by the Luiz Inácio Lula da Silva government to contain the impact of the oil price surge on fuel prices already cost R$ 37.5 billion, according to data from the Ministry of Planning. The amount could be even higher by the end of the year, as it only considers subsidies through September. The economic team states that these tax cuts are being compensated by increased revenue resulting from the oil price hike itself, which this week surpassed US$ 100 per barrel.
Brazil is a net oil exporter, and the surge in the commodity's price increases government revenue from royalties, special participation rights, and other taxes. Therefore, the Executive established a 12% Export Tax on oil and gas to capture part of this revenue increase.
On Wednesday, the government announced a decree that expands the gasoline subsidy from R$ 0.44 per liter to R$ 0.63. Additionally, there will be a reduction of R$ 0.19 per liter for ethanol. The gasoline subsidy was set to expire on Wednesday, and the government decided to replace it with a new format of fuel support.
