Brazil Oil Export Tax in Limbo as Court Suspends Levy Amid Government Extension

Brazil's oil export tax has been thrown into uncertainty after a local court ordered its suspension while the government extended it for another 60 days. The conflicting moves set up a potential legal battle between President Luiz Inacio Lula da Silva's administration and oil producers.

The foreign trade chamber, Camex, approved the extension of the 12% tax on August 27, which was due to expire early next month. However, a federal court granted an injunction suspending the levy, according to a decision seen by Reuters.

The tax was introduced earlier this year as part of a package of measures adopted by the Lula administration to shield consumers from higher oil prices following the U.S.-Israeli war on Iran and the closure of the Strait of Hormuz. The revenue obtained from the tax would help fund fuel subsidies, including for diesel, gasoline, jet fuel, and cooking gas.

The suspension of the tax could benefit other major oil producers operating in Brazil, including Shell, Equinor, and TotalEnergie. Petrobras, the state-run oil firm, paid around 4.9 billion reais ($948.27 million) in export taxes during the second quarter, regulatory filings showed.