Brazil Extends Fuel Tax Benefits to Combat Rising Prices Amid Global Conflicts
Brazil extends diesel, biodiesel, aviation kerosene, and LPG fuel tax benefits through July to mitigate rising prices amid Middle East conflicts, supporting transportation and consumers.
- • Brazil extends a new R$1.12/liter diesel subsidy replacing expiring subsidies starting October 1, 2026.
- • GLP subsidy extended with federal funding increased to R$660 million until July 31.
- • Tax exemptions for biodiesel and aviation kerosene continued until July 31.
- • Rising aviation fuel costs have caused airlines to cut flights, especially in Northern and Northeastern Brazil.
Key details
The Brazilian federal government has announced an extension of multiple fuel tax benefits and subsidies, aiming to alleviate pressure on prices caused by ongoing conflicts in the Middle East. Effective from October 1, 2026, the Lula administration will replace expiring diesel subsidies with a new R$1.12 per liter subsidy, alongside a targeted R$0.35 per liter discount for diesel used in road transport. This new measure substitutes the expiring federal tax exemptions (PIS/Cofins) on diesel and acts as a 'cashback' to offset resumed tax collections.
Additionally, subsidies for liquefied petroleum gas (GLP) have been extended until July 31, with federal funding doubled from R$330 million to R$660 million. This will provide consumers with an R$11 benefit per 13-kilogram gas cylinder sold. The government also prolonged tax exemptions on biodiesel and aviation kerosene until July 31, maintaining near-total tax discounts — 100% for biodiesel and 99.99% for aviation kerosene.
These decisions come after delays in Congress prevented the approval of a proposed law to use extraordinary oil revenue for offsetting fuel tax relief. Consequently, a provisional measure authorized economic subsidies to fuel producers equal to the discontinued tax benefits.
The aviation sector, heavily impacted by surging fuel costs, benefits significantly from these extensions. The Associação Brasileira das Empresas Aéreas (Abear) notes that aviation kerosene accounts for 45% of airline operating costs; prices have more than doubled since February, from R$3.30 to R$6.65 per liter. This increase has forced airlines to reduce flights, with daily cancellations projected at 93 in May and 121 in June, particularly affecting Brazil's Northern and Northeastern regions.
President Luiz Inácio Lula da Silva and Finance Minister Dario Durigan underscored the importance of these measures in stabilizing transportation and consumer sectors amid geopolitical tensions that drive global fuel price volatility.
The extensions provide a comprehensive approach to managing fuel affordability, balancing tax revenues, and supporting both road and air transportation sectors during ongoing international crises.
This article was translated and synthesized from Brazilian sources, providing English-speaking readers with local perspectives.
