By Jeffrey T. Lewis

SÃO PAULO--Shares of Brazil's state-controlled Petróleo Brasileiro SA plummeted Monday at the start of trading after Brazilian President Jair Bolsonaro on Friday sparked concerns about government interference in the oil company when he named an army general to take over as chief executive officer amid a dispute over fuel price increases.

Shares of Petrobras, as the company is known, dropped more than 16% shortly after the start of trading Monday, after a more than 6% decline on Friday. Brazil's benchmark Bovespa stocks index fell more than 4% Monday.

Mr. Bolsonaro's nominee for the CEO position is Joaquim Silva e Luna, who holds the rank of general in Brazil's army and is a former defense minister. Mr. Silva e Luna is currently the Brazilian Director General of Itaipu Binacional, the Brazilian-Paraguayan agency that operates the Itaipu hydroelectric facility straddling the border between the two countries.

The president's decision to try to replace Petrobras's current CEO, Roberto Castello Branco, still has to be approved by the company's board. The government nominates a majority of Petrobras board members, but several of them are nominally independent and it's not clear yet if they'll vote to oust Mr. Castello Branco.

Brazilian news organizations have reported that several board members who have defended the company's independent price-setting policy are considering resigning if Mr. Castello Branco leaves. Mr. Castello Branco hasn't commented on his intentions, though Petrobras said on Friday his term as CEO officially lasts through March 20, 2021.

Mr. Bolsonaro at the start of his administration in Jan. 2019 named Mr. Castello Branco as head of the oil company and promised the CEO would have freedom to set fuel prices based on international oil prices and other market references. But last Thursday, after the company said it would raise the price of gasoline by almost 10% and the price of diesel fuel by almost 15%, Mr. Bolsonaro criticized the CEO and promised changes at the company in coming days.

Government interference with the price policy has caused problems in the past. Petrobras kept fuel prices artificially low just a few years earlier under former Brazilian President Dilma Rousseff to help keep inflation under control, leading to big losses for the company.

In 2018 truckers complaining about the high price of diesel fuel went on strike for 10 days, halting the flow of goods around the country, slamming the economy and leading to the resignation of then-CEO Pedro Parente.

Truckers have been complaining about the recent price increases, with some groups convoking a strike at the start of February. That action had few adherents, but Mr. Bolsonaro has on several occasions expressed concern about angering truckers.

Write to Jeffrey T. Lewis at jeffrey.lewis@wsj.com

(END) Dow Jones Newswires

02-22-21 0905ET