Petrobras Raises Fuel Prices

RIO DE JANEIRO--Brazilian state-run oil firm Petroleo Brasileiro SA said late Thursday it would raise fuel prices in the country starting midnight Friday, following months of agitation from investors for such a move.

The price increase signals that the government of recently re-elected President Dilma Rousseff may ease some government controls on the company.

Petrobras will raise gasoline prices by 3% and diesel prices by 5%, the company said in a statement. The move comes a day after the company's board of directors recommended that prices remain unchanged.

Brazil has subsidized the cost of fuel since 2011, and Petrobras foots the bill for the difference between market prices and the subsidized price, a policy that has cost the company billions of dollars and contributed to making it the world's most heavily indebted oil major.

Petrobras executives and investors for months have been pushing for a rise in prices. In recent days, as a decision on the fuel price looked less likely, Petrobras shares were battered. Shares are down more than 30% in the past month.

The costs related to the subsidy threatened the feasibility of the company's massive $220 billion five-year spending plan, according to analysts, which include large investments in deep-water oil exploration and production, and the construction of two new refineries.

Write to Will Connors at [e-mail]

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