Brazil’s federal government has eliminated taxes on diesel fuel in an effort to mitigate the impact of rising global oil prices, spurred by escalating tensions in Iran. The move, announced Thursday, March 12, 2026, removes the PIS/Cofins federal VAT-like levy on both diesel imports and sales.
The government estimates the measure will reduce diesel prices by R$0.32 per liter (approximately 20.9¢/USG), providing relief to key sectors including freight transport, agriculture, and urban supply chains. This decision comes as Ice Brent futures surged above $100 per barrel earlier Thursday following attacks in Iran, according to Argus Media. The decision highlights Brazil’s sensitivity to international oil market fluctuations.
In addition to eliminating the tax, the government will provide a subsidy of R$0.32 per liter to both diesel producers and importers, effectively creating a total price reduction of R$0.64 per liter for consumers at the pump. The economic relief package is capped at a total of R$10 billion. “We are performing economic engineering to prevent the effects of the irresponsibility of the war from reaching the Brazilian population,” President Luiz Inacio da Lula said when announcing the measure.
The government also announced the implementation of a 12% export tax on crude oil and a 50% export tax on diesel fuel. These measures are intended to incentivize domestic refining and ensure a stable supply for the Brazilian market. The government expects these export taxes to generate approximately R$30 billion in revenue, which will offset the R$30 billion fiscal impact of the tax exemption and subsidy.
To further stabilize the market, the National Agency of Petroleum, Natural Gas and Biofuels (ANP) will receive expanded oversight powers to prevent abusive pricing practices and speculative hoarding. A decree will also be published requiring fuel stations to clearly display the reduction in taxes and subsidies to consumers.
The announcement included participation from Minister Rui Costa (Chief of Staff), Finance Minister Fernando Haddad, and Minister of Mines and Energy Alexandre Silveira. The government is also hoping to secure cooperation from state governors to reduce state-level taxes on diesel, Lula added.
Brazil is a net exporter of crude oil but relies on imports to meet a portion of its demand for refined products, particularly diesel. But, the country’s dependence on oil supplies from the Persian Gulf region is relatively limited, according to government officials.
The price of Brent crude has risen above US$100 a barrel in response to recent attacks on oil tankers near the Strait of Ormuz, a critical shipping lane for approximately 20% of global oil production. Since the start of the conflict in Iran, the commodity has accumulated gains, nearing US$120 per barrel earlier this week.
