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Brazil President Ousts Petrobras CEO

The President of Brazil, Jair Bolsonaro, ousted Petrobras chief executive Roberto Castello Blanco, replacing him with former Defense Minister Joaquim Silva e Luna.

The move follows a spat between Bolsonaro and Castello Blanco regarding diesel prices. Petrobras and its chief executive specifically have been calling for diesel and gasoline price hikes to reflect the oil price situation on international markets. However, price hikes like that tend to spark protests, which is why Bolsonaro instituted a two-month cut in diesel price taxes starting March 1.

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This happened after Petrobras announced the fourth price increase at the pump since the start of the year, setting its chief executive on a collision course with the president, prompting the latter to say last week that “something will happen at Petrobras in the coming days,” per a Reuters report. The threat followed comments made by Castello Blanco about the possibility of a truckers’ strike in response to higher prices.

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Roberto Castello Blanco is the second Petrobras CEO who is kicked out of the company for his market-oriented policies. His predecessor, Pedro Parente, also wanted to bring Petrobras prices at the pump closer to international market prices, as Petrobras kept losing money from the long-standing practice of keeping prices much below international benchmarks.

This met with opposition from the Brazilian president and eventually led to Parente’s resignation in 2018. The new appointment will be the third military official at a key energy-related post, according to Reuters. The minister of mines and energy is an admiral, and so is the president of the Petrobras board of directors.

If Silva e Luna’s appointment is any indication, Brazil’s president does not want a state oil company that operates under free-market principles. While the prioritization of low gas prices for voters is understandable, however, the departure from market-oriented leadership will cost the government in lost revenues.

By Irina Slav for Oilprice.com

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