Brazil's Petrobras may raise fuel prices in 2014 -CEO

Reuters

BRASILIA, Dec 8 (Reuters) - Brazil's state-run PetroleoBrasileiro SA could raise fuel prices next year usingits new pricing formula, Chief Executive Maria das Graças Fostertold a local newspaper in an interview published on Sunday.

The Rio de Janeiro-based company, known as Petrobras, latelast month raised fuel prices less than expected and announcedit was adopting a new policy to adjust prices to be more in linewith international ones.

However, the company declined to detail the formula,disappointing investors worried about Petrobras's financialhealth after it suffered heavy losses due to a fuel subsidy.Petrobras shares plunged last week to its lowest level in nearlythree months.

Petrobras imports fuel to meet domestic demand and sells itat below-market prices as part of government efforts to controlinflation, leading to hefty losses in its refining division.

"I expected a greater understanding from the market giventhe tremendous progress we made" with this formula, Foster toldthe daily Folha de Sao Paulo. "We need time to explain andquantify the effects of this new methodology."

When asked if the company planned price increases next year,Foster said that it is "possible" under the new formula.

Foster added that the company never planned to make theformula public, which is in line with other companies' pricingpolicies that remain secret to protect commercial interests.

The company has been under heavy pressure from investors tohike fuel prices to avoid further losses, but the government, asthe controlling shareholder, has kept prices stable to help itease inflation that remains well above the center of theofficial target of 4.5 percent, plus or minus 2 percentagepoints.

Petrobras, whose 13 Brazilian refineries have a monopoly onfuel processing in the country, raised gasoline prices by 4percent and diesel by 8 percent on Nov. 30. In the thirdquarter, domestic gasoline was 18.9 percent below world pricesand diesel 20.1 percent below, according to Planner Corretora, aSao Paulo securities brokerage.

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