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The decision of Brazil's president Jair Bolsonaro to replace the chief executive of oil major Petrobras triggered investor panic and a selloff that led to a slump in the company's shares yesterday that can be measured in billions.
Bolsonaro ousted Roberto Castello Blanco after less than three years at the Petrobras helm and replaced him with former defense minister and army general Joaquim Silva e Luna.
As a result, banks and analyst agencies rushed to downgrade the company's credit ratings and shares in Petrobras took a 22-percent plunge on Monday after the news broke, shedding some $13 billion from its market value.
"A good reputation is hard to earn and easy to lose," said one analyst, as quoted by Reuters.
The replacement of the Petrobras top man follows a spat between Bolsonaro and Castello Blanco regarding diesel prices. Petrobras and its chief executive 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.
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.
Bolsonaro has made it clear on numerous occasions that he and Castello Blanco do not see eye to eye. As Reuters recalls, the president even mocked the Petrobras CEO for social distancing since the start of the pandemic.
The current Petrobras chief executive, let's be very clear, has been at home for 11 months without working, working remotely. Now, the boss has to be on the front line, Bolsonaro said recently. "This is for me unacceptable," he added.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.