LONDON (Bloomberg) – Refinaria de Petroleo Ipiranga SA, Brazil's second-largest oil company, said it halted refining operations because it can't raise fuel prices in Brazil enough to cover the cost of imported crude oil.

The shutdown of its refinery is the third suspension in 16 months, the Rio Grande, Brazil-based Ipiranga-based company said in a filing today with Brazil's securities regulator. Crude oil futures have risen 13 percent since Dec. 30.

Ipiranga operates one of two refineries in the country not owned by Petroleo Brasileiro SA, Brazil's state-controlled oil company. The company, which has no production of its own, must import light crude oil at world prices, which at almost $70 a barrel are near all-time highs. Petrobras, which refines 98 percent Brazil's fuel from its own domestic crude reserves, has kept fuel price increases below world levels, helping the government, control inflation.

``The problem for Ipiranga is two-fold,'' said Gina Montone, an oil-industry analyst with the Sao Paulo office of ABN Amro Bank NV, a Dutch bank.

``Petrobras' pricing policies have hurt, and the company has also failed to invest sufficiently to adapt is refineries to buy cheaper heavy crude produced in Brazil.''

Petrobras's fuel pricing policies differ from most other markets, primarily in the longer lag between moves in world oil prices and changes in local prices. Petrobras last raised Brazilian fuel prices on Sept. 12, when it increased wholesale gasoline 10 percent and diesel fuel 12 percent.

Since then the price of oil has jumped 8.8 percent and the price of gasoline 7 percent on the New York Mercantile Exchange. ``Nowhere in the world is the price of oil adjusted like in Brazil and this has a big impact,'' Montone said. ``Still, the main problem is Ipiranga's lack of investment in new refining technology.''

Ipiranga has asked Brazilian antitrust regulators to investigate the situation, the statement said. The company won't resume refining until world oil prices fall or action is taken by the government, the statement said.

Calls to Ipiranga's press offices in Rio de Janeiro, Sao Paulo and Rio Grande, Brazil, requesting comment were not returned.

Yesterday Refineria Ipiranga preferred shares, its most- traded class of stock, rose 10 centavos, or 0.3 percent, to 30.60 reais.