As a 39% increase in natural gas by Petrobras will reach your pocket | Economy

In a year in which the state-owned company has already increased gasoline prices by 46.2%, diesel by 41.6% and bottled gas by 17%, the readjustment of almost 40% at once in natural gas scared consumers .

But much of the fright comes from a common confusion: that of thinking that natural gas and bottled gas are the same thing. They are not.

In Brazil, 91% of households use canister gas to cook, while only 8% use piped gas (as natural gas is called), according to 2019 data from IBGE (Brazilian Institute of Geography and Statistics).

Natural gas is mainly destined for industry (43%), electricity generation (38%) and gas powered vehicles (9%), with households accounting for only 2% of the consumption of this fuel in the country, according to data from 2020 from Abegás popularly (Brazilian Association of Pipeline Gas Distribution Companies).

But that does not mean that the consumer has nothing to worry about.

According to experts, although the effect of the readjustment of natural gas is not as immediate for families as the increase in gasoline and bottled gas, this impact should reach the final consumers, but indirectly.

This is because natural gas represents a significant expense for a relevant part of the industry, which must pass on the high costs to the consumer through the products sold.

The consumer should also feel the increase in natural gas in the electricity bill, since the cost for thermal generation should rise, which tends to be passed on to prices by energy distributors, on the occasion of their annual readjustments.

Understand below how the increase of 39% of natural gas will affect your pocket.

2 of 2 Only 8% of Brazilian households use piped gas (as natural gas is popularly called), but even those who are outside this percentage can undergo readjustment – Photo: BBC

Only 8% of Brazilian families use piped gas (as natural gas is popularly called), but even those who are outside this percentage can undergo readjustment – Photo: BBC

1. What is the difference between natural gas and canister gas?

Natural gas is that which arrives at piped homes, sold by distributors such as Comgás, in São Paulo, and Gasmig, in Minas Gerais.

Botanical gas, on the other hand, has the technical name of LPG (liquefied petroleum gas) and is sold by distributors such as Ultragaz, Liquigás, Supergasbras, Nacional Gás and Copagaz.

According to Adrianno Lorenzon, natural gas manager at Abrace (Brazilian Association of Large Energy Consumers), the main difference between the two fuels is that LPG is produced from oil refining, as well as gasoline and diesel, while natural gas is extracted directly from underground reservoirs.

“From a physical point of view, LPG has more carbon molecules and natural gas has less. In practice, this means that LPG can be pressurized in a canister and it becomes liquid – you can easily transport it to housewives” says Lorenzon.

“Natural gas, on the other hand, only has one carbon molecule. As it is very light, it is not possible to do that, so it is always sold piped”, he adds.

2. What led to the readjustment of 39% of natural gas at once?

According to Petrobras, in a statement released on Monday, there are three factors that led to this impressive readjustment: the recent increase in oil prices, the exchange rate and the readjustment of the price share related to the transportation of gas by the IGP-M (General Price Index – Market), an inflation index that accumulates an increase of 31% in 12 months until March.

Unlike gasoline, diesel and canister gas, which are readjusted by Petrobras without a fixed periodicity, natural gas is readjusted by the company on a quarterly basis. This means that the rise or fall in costs is held back for three months, until it is passed on by the state company to the distributors.

Between January and March, the price of oil increased by 38%, according to the state-owned company.

“The price of a barrel of oil reflects the return of the world to normal,” explains André Braz, coordinator of price indices at Ibre-FGV (Brazilian Institute of Economics of the Getulio Vargas Foundation).

“Large economies are making investments both in combating covid and in the recovery of activity. These two movements have helped several countries to return to their normality and, with this, the demand for oil products increases, pushing the price of the barrel”, states.

The economist also recalls the harsh winter this year in Texas, a major oil producer in the United States, which contributed to reducing the oil supply, driving prices up.

The dollar ended 2020 quoted at R $ 5.19 and reached R $ 5.71, last Friday (03/02), at a 9.9% appreciation against the real.

“Our currency fluctuates due to the domestic uncertainty that hovers over two pillars: the first linked to the increase in cases of covid and the lack of a faster vaccination strategy; and the other is the increase in the public deficit”, says Braz.

“We already had a very high relationship between public debt and GDP and this situation generates a lot of uncertainty, which causes a devaluation of the exchange rate, by alienating foreign investments from the country.”

The IGP-M, an inflation index that also corrects rents, has a very large weight of commodities in its composition. Thus, the increase of 31% in 12 months until March reflects these same two movements pointed out by the FGV economist: the rise in commodities due to the global economic recovery and the devaluation of the real caused by domestic uncertainty.

Petrobras raises sales prices of natural gas to distributors

3. How should the 39% readjustment of natural gas affect families?

According to André Braz, the readjustment announced by Petrobras on Monday (04/04) should reach the consumer in two ways, one direct and the other indirect.

The direct transfer should affect the share of consumers who use piped gas in Brazil. This transfer is not immediate and should happen as the annual readjustments of state distributors are authorized by regulatory agencies.

Piped gas is most consumed in Brazil by families with higher incomes, who live in the central regions where there is a supply of piped gas, and in the Southeast, which accounts for 91% of residential piped gas consumed throughout the country, according to Abegás.

For this reason, the weight of gas piped in the IPCA (National Consumer Price Index) is much lower (0.13%) than the weight of bottled gas (1.14%). Thus, a readjustment of natural gas has less impact than a readjustment of LPG on the official inflation index.

The indirect transfer, on the other hand, should affect all consumers of industrial goods and electricity.

“There is a vast industrial production that uses gas as an energy resource”, says the economist. “Sectors that are very dependent on gas end up absorbing this increase in their production costs and passing this on to products.”

4. Which sectors of the industry consume the most natural gas?

According to Lorenzon, from Abrace, among the industrial segments that most consume gas in its production process are fertilizers, steel, glass, paper and cellulose, chemicals, ceramics, cement and aluminum.

“If the company is going to export and is competing globally, it has a very small space to pass on this increase, because we are not seeing this level of adjustment in the rest of the world,” says the natural gas manager. “The company ends up getting squeezed, which helps explain the movement towards deindustrialization in Brazil.”

“For those who are working in the domestic market, then there will be a transfer of costs and this will end up impacting inflation, through the steel that will enter the car, the glass that will manufacture the bottle and so on. That’s how it gets there to the consumer. ”

In the electric sector, the increase in natural gas should affect thermoelectric plants powered by this fuel.

“Each thermoelectric has its natural gas contracts. These contracts will be readjusted and as the plants receive this increase they will pass this on to the generated energy, which is sold to distributors, who will pass it on to final consumers”, explains Lorenzon.

“Here again, there is a large indirect inflationary effect along the chain.”

5. Could natural gas be cheaper in Brazil?

In the assessment of the Abrace representative, an important step towards reducing the price of natural gas in the country was taken with the approval in March of the new legal framework for the sector by Congress.

The expectation is that the legal change will allow competition in the natural gas market, which today is practically monopolized by Petrobras.

“The law must be signed by the president this week, when the 15 days for presidential sanction expire,” says Lorenzon. “It will then be necessary to put the law to work, with all the necessary regulations after the sanction. We understand that, by complying with all the guidelines provided for in the law, this will enable the entry of new agents in the market, competing with Petrobras and then the market laws will start to work. ”

Abegás (Brazilian Association of Pipeline Gas Distribution Companies), on the other hand, argues that a way to lower gas prices in the country would be to increase national gas consumption.

“Today, more than 50 million cubic meters of national natural gas are re-injected monthly, which in large part could be reaching the consumer market, contributing, with this increase in supply, to the reduction of prices”, said the entity, in note.

Brazil reinjected 13.3 billion cubic meters of natural gas between January and August 2020. The volume corresponds to 43% of the gas produced in the country in the period. The gas is reinjected as part of the oil production process, but also due to the lack of infrastructure for transporting the fuel to the coast.

“The increases in the price of natural gas do not bring benefits to the distributors”, says Abegás. “On the contrary, they end up making natural gas competitive in relation to other energy sources such as gasoline, fuel oil, LPG (cylinder gas) and electricity.”

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