*Originally published in Valor Econômico.

**This is an AI-powered machine translation of the original text in Portuguese

The closure of the Strait of Hormuz and the geopolitical escalation in the Middle East sent a real shockwave through international oil prices and, with it, exerted political pressure on the Brazilian government. The result, following a period of uncertainty, was the creation of the Emergency Domestic Fuel Supply Regime. The response was expected and legitimate, given that Brazil imports a significant portion of the diesel it consumes, and its dependence on road transport is unquestionable, accounting for 65% of all national logistics flow. This combination makes fuel prices an inflationary factor with broad effects on the economy. However, there are problems with the implementation of the measures adopted.

The Regime has mobilized three simultaneous fronts: a diesel subsidy, set at R$ 1.52 per liter; a requirement for distributors to publicly disclose their gross margins; and intensified oversight of “abusive pricing,” subject to penalties of up to R$ 500 million. Each of these fronts reveals problems that, when combined, jeopardize precisely the supply that the government aims to guarantee.

The diesel subsidy is not, in and of itself, an inappropriate tool. Countries such as Japan, France, and Mexico employed similar mechanisms during the 2021–2022 price spike, adopting objective rules regarding who receives the subsidy, how much they receive, within what timeframe, and upon presentation of what documentation—a approach that made their respective policies relatively successful.

In Brazil, however, the decree does not establish a formula for calculating the amounts owed to producers and importers and does not specify the criteria by which compliance with price limits is verified as a condition for receiving the benefit, thereby failing to account for positive and negative variations between the market price and the price set by the government. In this scenario, distributors who purchased diesel at the international parity price—when the Strait of Hormuz caused global prices to rise—now face the dilemma of selling below cost in the hope of receiving compensation whose parameters have not yet been finalized.

The obligation to disclose gross margins broken down by distributor, with a frequency that keeps them operationally current, is the second key aspect of the Regime. The rationale is understandable: during periods of high prices, the suspicion that distributors are widening margins at the consumer’s expense creates political demand for transparency. The instrument chosen is precisely what CADE’s doctrine and case law identify as one of the most effective facilitators of price coordination.

The fuel distribution market operates with homogeneous products and import parity costs, which are publicly available. In this environment, the periodic and individualized disclosure of margins eliminates competitive uncertainty, which is precisely what prevents tacit price alignment and runs counter to CADE’s case law, which is unequivocal in stating that the disclosure of current and specific information on prices and margins is not healthy for the competitive environment. Furthermore, the ANP already possesses, under Article 8 of Law No. 9,478/1997, broad powers to request information for regulatory purposes without such data needing to be made public in granular detail.

The third front is equally problematic. Since the reforms consolidated in Law No. 9,478/1997, Brazil has operated under a regime of price freedom in the petroleum and derivatives sector. There is no administratively set maximum price, nor is there an official methodology binding on private actors. Defining what would constitute an “abusive price” in this context necessarily requires an analysis of dominant position and market power, which demands a structured administrative process, including adversarial proceedings and in-depth economic analysis.

Brazilian law lacks a well-established track record of determining whether prices are abusive; this is not an institutional failure, but rather reflects a choice made by the legislature, which—since the enactment of the new Competition Law—has expressly excluded predatory pricing as a distinct category from the list of violations of the economic order, recognizing that such an analysis is incompatible with simplified legal presumptions.

By prohibiting abusive practices, the Consumer Protection Code places the burden on the regulatory agency to demonstrate that the price is “excessive” or “incompatible with the nature of the business,” which requires precisely the structured analysis that the summary inspections—conducted by the dozens by state consumer protection agencies—do not perform.

The Petroleum Law established an institutional framework that balances supply security, free enterprise, and regulatory oversight, and this framework provides the necessary tools for a more effective response. The ANP has the authority and technical capacity to regulate subsidies with methodological clarity, eliminating the uncertainty that currently paralyzes importers and distributors. The publication of aggregate margin indicators by segment and region, replacing individualized disclosures by company, serves the legitimate public interest in transparency without producing a potential anticompetitive effect.

Any investigation into anticompetitive conduct in the fuel supply chain, should such conduct in fact occur, must be conducted by CADE in accordance with the procedures and analytical rigor required by Law No. 12,529/2011, rather than through summary notices that shift the burden of proof onto private entities.

Finally, consumer protection in the face of fuel price shocks is more effective and less distorting when targeted directly at well-defined and specific segments—e.g., independent truckers, small freight operators, and households dependent on LPG—than when applied broadly across the entire supply chain, benefiting primarily those who need it least.

External shocks to oil prices are predictable in their recurrence, though not in their timing. Responses to them should be equally predictable: structured, methodologically sound, and consistent with the model Brazil has chosen for the energy sector. An intervention that creates legal uncertainty, facilitates coordination among competitors, imposes multimillion-dollar fines without market criteria, and blurs the regulatory agencies’ respective roles may ultimately produce a legacy that is more enduring and costly than the very shock it sought to mitigate.