A worker uses a petrol pump at a Brazilian oil company Petrobras gas station in Brasilia, Brazil March 7, 2022.
A worker uses a petrol pump at a Brazilian oil company Petrobras gas station in Brasilia, Brazil March 7, 2022. Reuters / ADRIANO MACHADO

Brazilian motorists will soon pay more at the pump after state-run Petrobras said it plans to hike fuel prices from Saturday as the country grapples with soaring inflation ahead of elections later this year.

Leading politicians denounced the announcement on Friday. Petrobras shares plunged almost 10% on fears they would interfere with the company, making it the top loser on Brazil's Bovespa index, which fell nearly 4%.

Petroleo Brasileiro SA, as Petrobras is formally known, defended the hike, saying it must "seek convergence with market prices" due to structural changes in the oil market.

Diesel prices at Petrobras refineries will rise 14% to 5.61 reais ($1.10) per liter, while gasoline will go up 5% to 4.06 reais per liter.

The hike is the first for diesel in roughly a month in Latin America's biggest economy. Gasoline prices have not risen since March.

President Jair Bolsonaro, who faces an uphill re-election bid in October's election, tweeted that "Petrobras might plunge Brazil into chaos," citing a 2018 economic downturn caused by a truckers strike over fuel prices.

He added later in an interview that the price hike was a betrayal of the Brazilian people and that he had spoken with Lower House Speaker Arthur Lira about opening a congressional investigation into Petrobras' board of directors.

Lira tweeted that Petrobras Chief Executive Jose Mauro Coelho should resign and said congressional leaders must meet to reevaluate fuel pricing policy.

Lira's comments are a "very tough speech against Petrobras," BTG Pactual analysts said in a note to investors.

"At this point, upsides and downsides are meaningful depending on what to expect after elections, which corroborates with our view that it's a high-risk investment thesis."

Petrobras pegs fuel prices to international energy markets and foreign exchange rates rather than offering subsidies.

Gasoline prices were 28% below international averages and diesel 19% cheaper at the end of last week, according to Itau BBA.

($1 = 5.1090 reais)