The Brazilian government unveiled a package of fuel-price measures on Thursday, combining a temporary cut in federal levies on diesel with new compensation for Petrobras's decision to hold pump prices below international benchmarks. The package, briefed by the finance and mines and energy ministries, is the largest direct intervention in fuel pricing by Lula's third government.
Brent has run above $107 a barrel for weeks as the closure of the Strait of Hormuz to most commercial traffic continues, with Chinese supertankers the only consistent volume getting through. Brazil imports refined diesel even though it is a net oil exporter, and pump prices for diesel have risen roughly 14 per cent since the conflict began in late February.
Lula, addressing reporters at the Planalto, framed the measures explicitly as cost-of-living relief and rejected suggestions they were timed to the October 4 general election. "This is not politics, this is bread on the table," he said. He is seeking a fourth term against an opposition that has not yet coalesced behind a single candidate.
The finance ministry estimated the cost of the package at roughly 12bn reais ($2.2bn) over the rest of 2026 and said it would be funded through a mix of dividend payments from Petrobras and a modest reduction in below-the-line spending. Economists at Itaú and BTG Pactual flagged that the measures cut against the fiscal consolidation message the government has been trying to project to bond markets.
The real weakened slightly on the announcement before recovering, and the Bovespa closed marginally lower. Petrobras shares were flat: investors took the view that the implicit subsidy implied by holding pump prices below international parity is being made more transparent, even if the absolute drag on the company's margins is now formally codified.
Brazil's general government debt is forecast to climb above 95 per cent of GDP by year-end, from 87 per cent in 2024, and the high real interest rate set by the central bank to fight inflation continues to constrain fiscal room. The October election will be the first since the Bolsonaro family's political project fragmented, and polls give Lula a narrow lead.