Similar to diesel, the volatility in liquefied petroleum gas ( LPG ) prices caused by the war in the Middle East opened a political crisis for the government of Luiz Inácio Lula da Silva on Thursday, April 2nd. This episode threatens to jeopardize the supply of cooking gas from distributors and retailers to low-income populations served by the "People's Gas" program .
Angered by the more than 100% increase in the price of LPG applied in an auction this week by Petrobras – which accounts for between 75% and 90% of the LPG sold in the country – Lula said he would annul the auction, criticizing the state-owned company for going against the government's directive not to raise the price of gas.
"An auction was held, with the stupidity and banditry they displayed with the diesel fuel, with a 100% markup," Lula complained on Thursday, April 2nd, during an interview with TV Record in Bahia. "How are you going to allow the people to bear this responsibility? You're not going to," Lula added.
The president also reiterated his intention for Petrobras to "repurchase" the Mataripe refinery, which recently increased the price of LPG by 15%. The refinery was sold by the Brazilian state-owned company in 2021, during Jair Bolsonaro's government, to Mubadala , the sovereign wealth fund of the United Arab Emirates.
The president's reaction came after distributors demanded the government increase the price of LPG supplied to the "People's Gas" program. A senior gas sector executive, who wished to remain anonymous, told NeoFeed that the increase in the price of LPG, resulting from the high premium in the Petrobras auction, represents an extra cost of at least R$ 200 million per month for the country's distributors.
Considered one of the biggest social initiatives of the current administration, the federal program "Gás do Povo" (People's Gas) was established last year and guarantees 100% free refills of 13 kg gas cylinders for low-income families registered in the CadÚnico (Single Registry for Social Programs). It replaces the old "Auxílio Gás" (Gas Assistance) program from the Jair Bolsonaro government and currently serves approximately 15 million families in all municipalities across Brazil.
The program's initial budget of R$3.57 billion per year is expected to rise to R$5.1 billion in 2026, according to the Annual Budget Law. New contributions due to the current supply crisis may further limit government spending in an election year.
The crisis began to take shape on Tuesday, March 31, when Petrobras responded to the increased demand for LPG by interrupting the flow of the Strait of Hormuz in the Persian Gulf, with an auction in which it sold 70,000 tons of LPG at prices up to 100% higher than those charged in the state-owned company's price list.
In practice, Petrobras repeated the recent strategy adopted for diesel, which was also impacted by price volatility, with additional sales at high prices, close to the international market.
The total sales from Tuesday's auction represent approximately 11% of the total volume of LPG traded monthly in the country. To give an idea of the increase recorded, the price of cooking gas in a cylinder rose from a minimum of R$ 33.37 to R$ 72.77, a premium of 117% compared to the reference price at the Duque de Caxias (RJ) hub.
Two factors amplified the negative impact of this increase for the government. The first is that, unlike diesel, the price of cooking gas had been frozen since November 2024 – which further amplifies the unpopular reaction to the increase.
Furthermore, Petrobras likely failed to consider the reaction to the price increase from retailers and distributors, who are now threatening to stop supplying LPG to the social program if they don't receive a compensation adjustment – so much so that the auction led to the dismissal of the state-owned company's marketing manager.
"People knew the government's and Petrobras's directive: 'we are not going to increase the price of LPG'; but they held an auction against the wishes of Petrobras's management," said Lula, trying to absolve the president of the state-owned company, Magda Chambriard, of responsibility for the bidding process.
Stampede
On the eve of the auction, however, Abragás – an association that brings together the trade associations of LPG resellers – had already demanded that the Ministry of Mines and Energy (MME) update the reference prices. The same was done by Sindigás, the union that represents the distributors.
"If the government does not take urgent measures to stem this situation of discontent among retailers, the program risks a mass exodus of accredited businesses," warned the president of Abragás, José Luiz Rocha.
Following President Lula's complaints about the increases in LPG prices, Sindigás released a statement on Thursday, April 2nd, stating that it does not comment on prices, price projections, or any type of market-related estimate, thus avoiding escalating the controversy.
"The entity emphasizes that the prices of oil and its derivatives have been under strong pressure, largely due to conflicts with a significant impact on the global oil chain, which may influence the costs of LPG and promote possible changes in economic and market conditions in the product chain," the statement says.
The problem for distributors is that, in addition to the extra cost of at least R$ 200 million per month due to the increase in the price of LPG, there is not much room to absorb this impact.
According to 2026 data from the National Agency of Petroleum, Natural Gas and Biofuels (ANP), more than 80% of the national LPG market is concentrated in four large companies in the sector: Copa Energia (23.54%), Nacional Gás (21.53%), Supergasbras (21.27%) and Ultragaz (16.43%).
In the first two months of the year, LPG consumption in the country reached 1.16 million tons. The P13 format alone, the traditional 13-kilogram cylinder, accounts for 67.7% of consumption, totaling 785,500 tons.
“The price quoted by Petrobras was absurd, far above the market price,” an executive from a company in the sector told NeoFeed . “And since shortages are starting to appear, we had to buy at a price well above what is normally charged.”
The real risk is that, if there is no adjustment to the amount allocated to the "People's Gas" program of at least R$ 6 per cylinder – which would increase the government's annual expenditure by between R$ 390 million and R$ 450 million, depending on the final number of refills carried out – the trend is that retailers will start to withdraw from the social program and stop selling the cylinders at the price established by the government.
“I haven’t yet passed on the cost of the gas cylinder sales, and for now, I’m bearing this cost myself, but I won’t have enough resources for another three or four days at this price,” says this executive. “Resellers will stop selling, and the ‘People’s Gas’ program will start to lose momentum.”
The problem is that, in the case of distributors, the large volume of investments for the purchase of more gas cylinders, whose main objective is to meet the new demand, has already been made. Therefore, passing on the cost will be inevitable.
According to the executive, the only solution is for the federal government to increase the budget for the "People's Gas" program. "How can they cancel the auction if we've already purchased at this higher price and already invoiced? We're not going to stop supplying gas cylinders, but it will be necessary to pass the cost on," he says. "The program's profit margin is already small; it can't stay like this."
Pedro Rodrigues, director of the Brazilian Infrastructure Center ( CBIE ) and a specialist in the gas sector, states that the current LPG price crisis and the controversy surrounding Petrobras auctions reflect governance failures and undue political interference in a mixed-economy company, as is the case with Petrobras.
"Subsidies for LPG can be justifiable – and are – for social and health reasons, as is the case with the 'People's Gas' program, provided they are financed by the Treasury and well-targeted, not imposed on minority shareholders of Petrobras, a publicly traded company that follows strict rules," said Rodrigues.
According to him, the government confuses mitigating market volatility with forcibly lowering prices. “There are measures to cushion volatility, such as reducing PIS/COFINS taxes or using strategic reserves, as the United States did; price interventions to 'correct' distortions tend to create others,” he warned. “Politically, it’s easier to blame Petrobras auctions than to assume the budgetary cost of giving adjustments or offering subsidies,” Rodrigues concluded.
