In the first weeks of April 2020, the price of a barrel of oil (Brent) had already dropped to close to US$ 20, a value much lower than the average registered in January of the same year (US$ 64). A value as low as this has not occurred since 2002.
The sharp drop in the price of a barrel of oil directly influences the price of fuel at Brazilian service stations. Specifically diesel, fuel used on a large scale by trucks that transport road freight, had its price reduced from 3,85 R$/liter in January to 3,44 R$/liter in April, a drop of 11% in the period according to data of the ANP (National Petroleum Agency).
The reduction in the price of diesel brings a small relief to Brazilian transport companies, which, for the most part, suffer from reduced demand and face strong financial problems. Diesel is the main input for transporters and, on average, it represents 25% of the total costs of road freight transport (about 40% of the costs when transport is long distance and 5% when transport is fractioned over short distances ).
The graph below shows the evolution of the price of diesel S10 in Brazil compared to the price of a barrel of oil in dollars and reais.
Figure 1: Price of S10 diesel at service stations in Brazil and price of a barrel of Brent oil. NOTE: Month of April 2020: average Brent price from 1/04 to 17/04; average value of Diesel at Brazilian service stations from 5/04 to 11/04. Source: EIA and ANP. ILOS analyses.
The price of diesel dropped in all Brazilian states. Those with the highest price are still the states in the North region, which are the most difficult to access places, while the states with the lowest diesel prices are those in the South region.
Figure 2: Diesel S10 consumer price by region in Brazil – January and April 2020. NOTE: Without 1 refers to prices recorded from the 5th to the 11th of the month. Source: ANP. ILOS analyses.
Cabotage, in turn, which uses the bunker on its ships, also saw strong reductions in the price of this fuel, which also brought a certain breath to the segment, which was suffering from extremely high prices for the recently required low sulfur bunker fuel. of low sulfur content, which registered historic price records at the beginning of 2020. Cabotage, as well as road transport, has been reducing cargo movement due to the shutdown of factories, especially in the Manaus Free Trade Zone, a region with a strong participation of the transport mode. maritime.
Although it has some good consequences, such a drastic reduction in the price of a barrel of oil raises a lot of concern among producing countries, including Brazil. Because when the cost of extracting oil becomes greater than the sale value, the entire industry is threatened. To deal with the low demand, producing countries seek agreements to reduce the supply of oil in the world, trying to minimize the drop in prices, but this combination of interests is not easy.
While demand does not recover, at least the cargo transport segment, essential for the population in this time of pandemic, manages to reap some small fruits from this drop in fuel prices.
References:
Oil melts 40%, at the lowest level in 20 years, and Ibovespa opens lower
Oil price plummets: see questions and answers
What explains the drop in the price of oil and what are its effects
Maria Fernanda Hijjar
https://ilos.com.brExecutive Partner of ILOS, holds a master's degree and a degree in Production Engineering from the Federal University of Rio de Janeiro (UFRJ). With more than 10 years of experience in the field of Logistics and Supply Chain, working on several projects, management and participation in research associated with the subject. She has more than 20 articles in newspapers, magazines, periodicals and congress annals, being co-author of several titles in the COPPEAD Collection by Atlas publishing house and in the Panorama Logístico Collection ILOS and CEL / COPPEAD.
