Brazil’s diesel, gas price rises slowed in Sept

Brazil's increases in consumer prices for September slowed after a government tax-reducing measure decreased fuel prices.

Yet 12-month inflation remains higher, with increases especially in diesel and natural gas prices.

Residential natural gas prices increased by 0.11pc in September, compared with the previous month, while vehicular natural gas costs fell by 0.23pc in the same period, according to Brazil's institute of geography and statistics (IBGE). Both types of gas increased by 23pc and 21pc, respectively, from October 2021-September 2022.

The cumulative prices increases for 2022 is 13pc for residential natural gas and 14pc for vehicular natural gas. Similarly, diesel prices fell by 4.6pc in comparison with August 2022, while increasing by 45pc over the last 12 months.

Both commodity prices were at the center of popular dissatisfaction ahead of the first round of the presidential elections, which took place on 3 October. The VAT-like ICMS state tax cut for these products came during election pressures. The law classified the fuel and power sectors as essential to society and limited taxes to 17-18pc. Before, rates varied from 17-32pc. The biggest uncertainty regarding this decision is how long the government will be able to give up a portion of its tax collection to lower inflation rates, the chair of economics for IBS Americas' business school, Flavio Saraiva, said.

On an opposite trajectory, ethanol and gasoline prices fell by 8.3pc and 12pc, respectively, but posted even steeper price decreases over the last 12 months. The fuels' costs have decreased by 19pc and 24pc since October 2021, a steep decline in two of the country's most important industries.

Residential electricity prices paralleled ethanol and gasoline, rising by 0.78pc in September, against a 17.5pc drop in the last 12 months. The inflation rate for this product decreased by a cumulative 20pc for 2022 because of high generation costs last year, brought on by a drought that forced Brazil to heavily rely on expensive thermal generation — mostly concentrated on gas and diesel-fired plants. The unseasonable high rain levels during the dry season of 2022 boosted cheaper hydroelectric power, which decreased electricity prices.

By Rebecca Gompertz

Brazil&#39;s Sep 22 inflation rates % Product Aug-Sep 22 national inflation rate Oct 21-Sep 22 cumulative national inflation rate 2022 cumulative national inflation rate Residential natural gas 0.1 23.1 13.2 Residential electricity 0.8 -17.5 -19.9 Gasoline -8.3 -18.6 -26.0 Ethanol -12.4 -24.4 -31.9 Diesel -4.6 45.2 28.1 Vehicular natural gas -0.2 20.9 14.1

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