Brazil's federal government has created a new diesel subsidy worth R$1.12 per liter, roughly USD 0.20 at recent exchange rates, as it tries to shield fuel prices from the rise in global oil caused by the conflict in the Middle East.
The measure, published in an extra edition of the Diário Oficial da União, Brazil's federal gazette, on May 30, takes effect on June 1 and is set to run until December 31, 2026. It still must be reviewed by Brazil's Congress, the bicameral National Congress.
The Finance Ministry said the program is meant to "stabilize price and supply" for road diesel, a key fuel for Brazil's trucking-dependent logistics system. Higher diesel prices can quickly feed into freight costs and consumer inflation.
What Changes
The new program replaces two emergency subsidies that had been in force since March and expired on May 31. The first, Provisional Measure 1,340, paid R$0.32 per liter. The second, Provisional Measure 1,349, raised the benefit to R$0.80 per liter for diesel produced in Brazil and R$1.20 per liter for imported diesel, with the latter split between the federal government and state governments.
Under the new rule, the subsidy is unified at R$1.12 per liter for producers and importers authorized by the National Agency of Petroleum, Natural Gas and Biofuels (ANP), Brazil's oil and fuel regulator. The federal government will fund the program.
Companies that want to receive the money must formally join the program, prove that the subsidy was passed through to the fuel sale price and show the discount on electronic invoices. Firms already enrolled in the previous programs must request to leave those arrangements before joining the new one, while keeping the right to receive pending payments.
The ANP will calculate the amounts owed and make payments within 30 days after eligible companies file their requests.
Timelines and Reviews
Although the diesel subsidy is scheduled to last until the end of 2026, Estadão reported that the Finance Ministry may revise or halt the program at the end of each two-month period, after notifying beneficiaries.
That creates a longer formal window than several related fuel measures announced by the government, which run only until July 31. The Planalto Palace, the seat of Brazil's executive branch, described the broader package as a two-month renewal of emergency actions adopted after oil-market volatility intensified.
The government framed the measures as limited and subject to review. Dario Durigan, the finance minister, said in the official statement that the administration would monitor the war's impact while maintaining a commitment to fiscal neutrality and oversight of public spending.
Cooking Gas and Aviation
The package also extends support for liquefied petroleum gas, known in Brazil as GLP and widely used as cooking gas. A separate decree prolongs the subsidy for producers and importers until July 31 and doubles the federal resources available from R$330 million to R$660 million, roughly USD 120 million at recent rates.
The measure allows a subsidy equivalent to R$11 per 13-kilogram cooking-gas cylinder, a household staple in Brazil. O Tempo, citing the decree, said the support is designed to stabilize supply and reduce the risk that international oil and currency swings are passed directly to consumers.
The government also extended federal PIS/Cofins tax relief on aviation kerosene and on biodiesel blended into road diesel until July 31. The provisional measure further delays some air-navigation fee payments owed by Brazilian airlines to the Brazilian Air Force, giving companies until December to pay charges that would otherwise fall due in the second half of the year.
The measures give the Lula administration more time to absorb external oil shocks. They also leave open the central policy question: how long Brazil can use subsidies and tax relief to hold down fuel prices without increasing pressure on public accounts.