The government zeroed PIS/Cofins on diesel and announced it. Days later, ANTT (National Land Transport Agency) updated the report upon finding a 13.32% variation in the price of fuel. The two facts coexist without contradiction: they show that the final price is the result of a chain in which each link reacts according to its contracts, its stocks and its negotiation capacity.
Between the refinery and the pump there is an importer, distributor, transporter and station, none of which operate in a vacuum. There is fuel purchased at previous prices, replacement deadlines, working capital and margins that are very different from one link to another. When the government cuts taxes today, the product that is leaving the pump already entered the chain yesterday, and the reseller does not fully pass on relief on a cost that has not yet changed in its tank. In long chains, the relief effect looks less like a switch and more like a wave that loses strength as it passes through intermediaries.
The economic impact of a tax, or its removal, does not depend on who legally pays it, but on who can adjust less: the incidence falls more on those who have less room to escape the transaction. The same goes for changes caused by external factors, whether for price reductions or increases.
In diesel, the links in the chain do not have the same room for maneuver. The distributor operates on a scale, manages stocks, renegotiates deadlines and can postpone part of the transfer. The gas station adjusts the price while looking at its margin and that of the competitor around the corner. The self-employed truck driver, on the other hand, is much less flexible: he does not easily change fuel or reorganize his activity in the short term. Therefore, when the cost rises, it tends to absorb a greater portion of the shock.
Thus, when the tax falls, the opposite movement is not automatic, so there is no guarantee that it will be the one who will receive most of the relief, because part of it may be retained earlier, by agents who had been operating with a compressed margin. The gain, like the cost, does not necessarily go to those at the end of the chain, but to those with less ability to adjust. Hal Varian discusses this mechanism in his microeconomics manual, including showing that, when relative flexibility is on the other side of the consumer, the distribution of burden and benefit is reversed.
This also explains why two pumps on the same avenue react differently to the same advertisement. One may be burning more expensive purchased stock and preserving the price for a few more days, another, with more recent replenishment, drops sooner. What consumers interpret as lack of coordination or abuse is usually heterogeneity in historical costs and financial position. In markets with several intermediaries, the price observed on a given day mixes current cost, past cost and expectation about the future cost.
Furthermore, a relevant portion of the diesel sold in the country is imported. This means that the domestic price incorporates international oil, exchange rate, sea freight and risk premium. If the barrel and dollar rise at the same time, the tax relief does not disappear, but may be partially swallowed by forces that came from outside.
In practice, R$0.32 of tax is removed and it is assumed that the pump will fall by R$0.32, considering that it would only work in a market without stocks, without contracts, without lags, without imports and without margin disputes between intermediaries. In chains with heterogeneous agents and unequal bargaining power, R$1 of relief rarely generates R$1 of immediately visible relief: a part arrives late, a part is absorbed along the way, a part restores the margin of those who were squeezed. If the policy wants to guarantee that every announced cent reaches the truck driver in full, the fiscal cost of doing so will be even greater than estimated.
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