Brazil boosts diesel subsidies, cuts fuel taxes amid oil rally (updated)

Petroleo Brasileiro SA Petrobras

09/09/2026 15:45

Adds comments by minister and details of new measures, paragraphs 4, 8-9 and 12-14
Fuel-relief bill reaches about 40 billion reais from March to end-September, minister says
Government cuts gasoline taxes by 0.63 real per liter for next 30 days
Additional spending offset by roughly 10 billion reais in extra monthly oil revenue, officials say
By Marcela Ayres
BRASILIA, Sept 9 (Reuters) -  Brazil unveiled a fresh round of fuel-relief measures on Wednesday, boosting subsidies for diesel while applying tax cuts on gasoline and ethanol, as Brent crude remained near $100 a barrel amid geopolitical tensions in the Middle East.
Elevated oil prices and continued uncertainty in global energy markets warrant the measures, Brazil's government said in a statement. 
"The conditions that justify maintaining fuel-price smoothing policies remain in place," it said.
Since the start of the Iran war, Brazilian President Luiz Inacio Lula da Silva has sought to cushion the effects of higher oil prices ahead of this year's October election, in which he seeks another term in office.
The latest measures will bring Brazil's fuel-relief fiscal cost to about 40 billion reais ($7.8 billion) between March and the end of September, Planning and Budget Minister Bruno Moretti said at a press conference to explain the new measures.
     
TAX CUTS AND SUBSIDY EXPANSION 
The government said it will cut federal PIS/PASEP and Cofins taxes on gasoline imports and sales by 0.63 real per liter for the next 30 days, replacing and expanding a previous subsidy of 0.44 real per liter.
Lula's decree also reduced PIS/PASEP and Cofins taxes on ethanol by 0.19 real per liter, effectively bringing federal levies on the biofuel to zero.
The government also announced a diesel subsidy initially set at 1 real per liter, to be added to an existing subsidy of around 1.12 real per liter that will last at least until the end of September.
"We will evaluate whether we can remove the 1.12-real-per-liter subsidy on diesel or if it needs to be renewed," Moretti said.
Under the new subsidy scheme, fuel producers and importers opting in to the program must deduct the subsidy amount from sale prices and record the discount on invoices. Brazil's oil regulator, ANP, then reimburses participating companies.
As Brazil's main diesel producer, state-run oil firm Petrobras PETR3.SA would be the firm most affected by a new diesel subsidy. In its second quarter, the company's  operating cash flow suffered from a delay in reimbursements from ANP for previous subsidies.    
The gasoline and ethanol tax cuts will carry a fiscal cost of around 2 billion reais per month, with another 5 billion reais for the diesel subsidies, said Moretti.
     
WINDFALL REVENUES OFFSET COSTS 
Officials said the additional spending would be offset by roughly 10 billion reais in extra monthly revenue generated by higher oil prices, as Brazil, a net oil exporter, has benefited from a sharp increase in tax receipts and royalties linked to the rally in crude.
Since launching the first relief measures, Lula has argued that those windfall revenues should be used to protect consumers from a conflict in which Brazil has no direct involvement.
Earlier on Wednesday, the president signed an executive order authorizing 6.6 billion reais ($1.3 billion) in extraordinary spending to pay out different subsidies created months ago.
Of that amount, 5.6 billion reais will be used to pay out subsidies on diesel, while 998 million reais will support domestic production and imports of gasoline, the Planning Ministry told Reuters.  
     
($1 = 5.1043 reais)

(Reporting Marcela Ayres in Brasilia, Fabio Teixeira in Rio de Janeiro and Andre Romani,  Fernando Cardoso and Victoria Pacheco in Sao Paulo; Editing by Aurora Ellis, Barbara Lewis and Matthew Lewis)
((fernando.cardoso@thomsonreuters.com;))