Why White Flag Gas Stations Are Advancing In Brazil Amid The Economic Crisis

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The fuel crises continue in Brazil and in the world. In the search for more economical alternatives, Brazilians went hunting for cheaper and more reliable gasoline.

Also, with the war in Ukraine already impacting Brazil from north to south, some gas station networks have faced fuel shortages, which has caused price increases. According to Ricardo Magro, an Oil and Gas lawyer specializing in the tax area, Brazil has traditionally exported gasoline and imported diesel. After the outbreak of war in Europe, the United States, the country’s main partner in this area, stopped exporting this type of product. 

“Some gas stations are called white flag because it is not affiliated with one of those famous international or national brands like Shell, Esso, Petrobrás, Ipiranga, Ale. And then, the gas station either has its own brand, or it has no brand at all. The gas station simply buys ethanol and oil products from the distributor that offers the best price and quality.”, states Ricardo. 

Almost a thousand new gas stations opened last year in Brazil without bearing brands such as BR, Ipiranga, Raízen , etc. , on their facades. Called “white flag”, they started to classify more than 40% of the total market in the country according to data from the National Petroleum Agency (ANP). For lawyer Ricardo, however, this movement should grow this year due to the economic crisis. 

The economic crisis not only brings greater demand for white flag stations as well as the potential disconnection of the brand. Resellers can revert the affiliation with major brands due to the high costs charged by distributors when purchasing fuel.

“Depending on the case, renounce the station association to big brands can be a viable and profitable option” warns Ricardo Magro, continuing, “But there are myths that the white flag stations sells poor quality fuel. A stimulated legend that interests the big distributors. Be aware that adulterated fuel can be found at any service station, of any brand, because the quality of the fuel depends much more on the honesty of the gas station owner than on the refinery or distributor”.

The main fuel distributors in Brazil are anchored because of the growth in household consumption that never arrives, these big players began to navigate in a market with more and more competition, especially with the white flag stations, the biggest rival in the segment. 

According to the specialist, another factor that has eroded distributors’ margins are the less remunerative prices today for ethanol, a segment in which these players profit less than gasoline and diesel. The companies allege strong evasion in ethanol and fear that the scenario will get worse with the release of direct sales to gas stations.

Ricardo Andrade Magro is an Oil and Gas lawyer specializing in the tax, philanthropic and martial arts area. Born in São Paulo and the son of Portuguese immigrants, he started law school in the 1990s and, as soon as he graduated in the 2000s, he founded his own law firm.

At the beginning of his business career, he had direct contact with work at his family’s gas stations and, soon after starting to work as a lawyer, he entered the oil market, still in its initial phase, in the distribution and sale of fuel.

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