Brazil raises fuel prices - Transportation costs will rise significantly

Brazil's state-owned oil company will raise fuel prices by almost 10% on Sunday because of a reduction in global output.

The increases is expected to push Brazil's inflation rate above the 11% mark.

Prices have already been rising after the currency, the real, lost 35% of its value because of speculators' fears about leftist President-elect Luiz Inacio Lula da Silva.

Petrobras said the price of cooking gas for consumers will increase 7.7%.

Global oil prices have risen sharply because of US threats to start a war with Iraq and a strike in Venezuela against President Hugo Chavez, which has brought output at the world's fifth largest oil exporter to a standstill.

Hostage to markets

Brazilian fuel prices are at the mercy of international oil and currency markets.

The country's fuel market was deregulated last January and Petrobras has been adjusting its prices in accordance.

Despite being a substantial exporter of oil, Brazil lacks refining capactiy and must import about a quarter of the 1.8 million barrels that it consumes daily.

Petrobras also imports about 40% of the natural gas used in the country.