By JEFF FICK
RIO DE JANEIRO -- Brazil's government will allow state-run energy giant Petroleo Brasileiro, or Petrobras, to raise gasoline and diesel prices by 5% in October, local business daily Valor Economico reported Friday.
The price increase comes amid slowing inflation and a stabilization in the Brazilian real, Valor reported, citing a source close to President Dilma Rousseff's office.
The real has strengthened recently to BRL2.20 to the dollar after the Brazilian Central Bank announced a series of currency-market interventions and amid expectations that the US Federal Reserve will keep its easy-money policies in place for longer than expected.
The increase would bring domestic fuel prices closer to international benchmarks and help shore up Petrobras's finances ahead of the important auction of an offshore oil field set for next month. Petrobras is obligated to hold a 30% stake in the field under new production-sharing agreements and will have to pay at least $2 billion in a signing bonus for the field.
Petrobras sells gasoline at about a 30% discount to international benchmark prices, with the government reluctant to authorize higher prices for fear of stoking inflation. The subsidized fuel sales have caused steep losses in Petrobras's refining division and raised concerns the company will be unable to carry out its plans to invest $237 billion through 2017.
Petrobras and the president's office were not immediately available to comment on the report.
Dow Jones Newswires