RIO DE JANEIRO, May 22 (Xinhua) -- Higher crude oil prices will be a boon to Brazil's tax collection and its state-run oil giant Petrobras, Brazilian experts have said.
With the price of a barrel of crude climbing to more than 70 U.S. dollars, the added income is benefiting the nation's federal, state and local coffers, as well as Petrobras, which is emerging from a corruption scandal and subsequent reorganization.
PETROBRAS'S PROFITS RISE
Petrobras saw its net profits in the first quarter rise 56 percent year on year, to reach 6.9 billion reais (some 1.87 billion dollars), the highest figure for the quarter since 2013.
Edmar de Almeida, an energy expert who teaches at the Economics Institute of the Federal University of Rio de Janeiro, expects the oil price to continue to rise to 75 dollars a barrel by the end of this year, pushed up by current geopolitical tensions in the Middle East and a decision by the Organization of the Petroleum Exporting Countries (OPEC) to cut back on output.
Petrobras' profits will keep growing, de Almeida told Xinhua, because the government "gave the company the freedom to pass on the higher oil prices."
"The results of this year's first quarter, when Petrobras clearly saw its benefits increase compared to the first three months of last year, is proof," he said.
Adriano Pires, director of the Brazilian Infrastructure Center, agrees. "Petrobras' current pricing policy is in keeping with the international market and that's the best thing that could have happened to the Brazilian oil sector. It's the right policy and in my opinion, the best option," said Pires.
"That doesn't mean that we can't discuss the impact of higher oil prices on the economy," added Pires, who believes the impact will be positive.
"From a business perspective, Petrobras stands to make more cash, and from a federal tax collection perspective, there's a rise in taxes from the (oil) royalties, which are subject to the price of oil and the dollar," said Pires.
OIL SECTOR RECEIVES BENEFITS
Economist Mauro Rochelin, from Brazil's Getulio Vargas Foundation (FGV), a leading policy think tank, said Brazil's states and cities will also benefit from higher oil prices that in turn lead to higher royalties.
Oil royalties "are always a necessity, because the majority of the country's states, especially Rio de Janeiro, Brazil's main oil-producing region, are undergoing a fiscal crisis that is certain to be the worst in history," said Rochelin.
"Brazil's oil industry recently went through a very large crisis, but the sector has great growth potential and the rise in the price of crude speeds up the process of growth recovery," said Rochelin.
The experts acknowledge that higher oil prices could lead to higher inflation, which the central bank has so far kept under control. "The rise could lead governments to raise the interest rate, which could slow or hinder economic growth. And for consumers, the increase is bad because expensive oil means expensive gasoline," said de Almeida.
Rochelin said Brazil has a small advantage in this regard, compared to other countries. "Most cars in the country are 'flex,' that is they combine ethanol and gasoline, so if the price of oil goes up, they can opt for ethanol, which is cheaper," he said.
Pires believes higher gasoline prices don't necessarily lead to inflation. "Today we have the lowest inflation ... in decades and we have doubled the price of (oil) derivatives. That shows that freely set prices and inflation do not necessarily go together, that inflation is a much more complex question," he said.
For now, Brazil and its oil company stand to benefit from the increase in revenue, said de Almeida, adding oil prices are tough to predict.
"Less than a year ago, the world's biggest oil producers were forecasting a scenario of permanently low prices, nevertheless prices are going up. That shows oil prices depend on factors that you can't predict," said de Almeida.
