Brazil extends 12% crude oil export tax for 60 days

Brazil will keep taxing exports of crude oil and bituminous minerals for another two months. The Executive Management Committee of the Foreign Trade Chamber, known as Gecex-Camex, decided on Thursday (9) to maintain the export tax on those products at 12%.

The measure, announced by the Ministry of Development, Industry, Trade and Services, will remain in effect for up to 60 days and will be reassessed after 30 days, depending on developments in the international market.

According to the government, the decision was driven by the worsening geopolitical situation in the Middle East, especially after renewed tensions between the United States and Iran and fresh instability around the Strait of Hormuz.

Temporary measure

In a statement, the ministry said maintaining the tax is intended to preserve domestic fuel supplies and ensure crude oil feedstock for Brazil’s refining system.

The decision, according to the ministry, “seeks to maintain adequate refining conditions in the country, in order to protect the domestic market from a possible fuel shortage.”

The ministry added that the measure was adopted “in light of recent changes in external conditions, especially after the deterioration of the geopolitical environment in the Middle East, with new episodes of tension in the Strait of Hormuz.”

Background

The oil export tax was created through a provisional measure issued in March to offset a reduction in federal taxes on diesel. The government adopted the diesel tax relief to soften the impact of higher international fuel prices caused by the conflict in the Middle East.

The provisional measure expires on Thursday. Because the export tax is a regulatory tax, Gecex was able to keep the rate in place through an administrative decision, without the need for congressional approval.

Initially, the government’s economic team had planned to gradually reduce the tax until it reached zero, provided international oil prices remained lower.

Conflict changes outlook

That strategy was revised after the renewed confrontation between the United States and Iran, which again put pressure on international oil prices.

In recent days, Brent crude has moved back toward US$80 per barrel, reflecting market concerns over possible disruptions to global supply amid tensions in the Strait of Hormuz, a route through which about 20% of the world’s traded oil passes.

Reassessment

On Thursday (9) morning, Finance Minister Dario Durigan said the government is also reassessing the timeline for removing fuel-related subsidies.

According to the minister, the change in the international environment requires caution before any further adjustment to the policy adopted for the sector.

Gecex will reassess the 12% rate within 30 days, taking into account the evolution of the conflict in the Middle East and its effects on the international oil and fuel markets.

Source: Agência Brasil

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