President Luiz Inácio Lula da Silva announced on March 12, 2026, the exemption of federal taxes on diesel to prevent price hikes amid Middle East tensions involving Iran, the United States, and Israel. The measure, costing around 30 billion reais, will be funded by a new tax on oil exports. Experts view the initiative as reasonable in the short term, though it has electoral implications.
In response to escalating tensions in the Middle East, including the war involving Iran, the United States, and Israel, the Brazilian government has introduced emergency measures to stabilize fuel prices. On March 12, 2026, President Lula announced the elimination of federal taxes on diesel, which account for an average of 5.2% of the final fuel price, according to Petrobras data. This decision aims to cushion the impact on the country's logistics chain, preventing pass-through costs to freight, food, and other goods.
The initiative will cost approximately 30 billion reais, including a tax waiver estimated at 22 billion reais and additional subsidies of up to 10 billion reais, based on 2025 diesel sales. To offset this revenue loss, the government will impose a 12% tax on oil exports, which totaled 44.7 billion dollars last year, per the National Petroleum Agency (ANP). Petrobras, handling over 50% of these exports (25.6 billion dollars), and other sector companies will bear part of the cost.
Folha de S.Paulo columnist Vinicius Torres Freire argues that the measure makes sense in the short term, for one year or less, to avert a 'wild' diesel price surge that could boost inflation and interest rates. He notes similarities to actions by the European Union and Asian countries but warns of distortions if extended. As of early March 2026, average diesel and gasoline prices remained stable, according to the ANP, though Petrobras price adjustments are anticipated.
The measure also carries an electoral tint, akin to Jair Bolsonaro's 2022 moves, but the current administration compensates for the revenue shortfall, unlike the previous one. The president stated there would be no interference in Petrobras pricing, prioritizing economic stability amid global oil market uncertainty.
