Brazil to Phase Out Gasoline Subsidy First as Diesel Support Stays Longer

Brazil’s government will remove its gasoline subsidy much sooner than the diesel subsidy, opting for a gradual approach to prevent disruptions in the country’s fuel market while maintaining its fiscal-neutrality goals.

Planning and Budget Minister Bruno Moretti said on Thursday that the gasoline subsidy of 0.44 Brazilian real (about $0.0844) per liter is expected to be eliminated within the next few days. In contrast, the larger diesel subsidy of 1.12 reais per liter will remain in place for a longer period, allowing authorities to manage the transition more carefully.

According to Moretti, extending the timeline for ending diesel support is intended to avoid sudden fuel price increases and potential supply shortages. He emphasized that Brazil’s diesel market currently has enough stability and predictability to ensure a smooth transition while continuing to meet domestic demand.

The government’s strategy is designed to preserve fiscal neutrality by balancing the cost of the subsidies with extraordinary oil-related revenues that are still expected to be transferred to the National Treasury. Officials believe this approach will allow Brazil to reduce public spending on fuel subsidies without creating unnecessary economic pressure.

Authorities are also mindful of global energy market volatility. Although international crude oil prices have fallen sharply since a preliminary peace agreement between the United States and Iran eased concerns over supply disruptions, those lower prices have not yet been fully reflected at Brazilian fuel stations.

Brent crude oil, which surged above $118 per barrel after conflict erupted in the Middle East in late February, was trading at around $71.51 per barrel on Thursday. The significant decline in global oil prices has provided room for policymakers to gradually unwind fuel support measures while limiting the impact on consumers and businesses.

In addition to phasing out fuel subsidies, Brazil’s government is reviewing its energy tax policy. Officials are considering whether to eliminate or reduce the 12% export tax on crude oil that was introduced in March, a move that could further influence the country’s oil industry and export competitiveness as policymakers continue to balance fiscal priorities with energy market stability.