Lula signs decree to cut gasoline taxes and boost diesel subsidy ahead of election

In a bid to protect consumers from climbing oil prices, President Luiz Inacio Lula da Silva signed a decree that cuts gasoline taxes and removes taxes on hydrated ethanol, resulting in lower pump prices. He also approved a provisional measure that adds a new diesel subsidy, supplementing an existing program and increasing overall diesel support. The actions follow a surge in Brent crude prices, which have stayed above $100 per barrel.

The finance ministry expects the higher oil revenue this month to more than cover the loss of tax income from the fuel measures. However, the additional diesel aid may force the government to consider spending cuts to preserve its primary surplus goal. The subsidies have already cost the government billions of reais since they were first introduced, and state oil company Petrobras has received substantial payments under the diesel program.