Finding Affordable Fuel in Brazil

Brazil’s got its hands full making ethanol a commodity.

The first car I bought when I got here was a used Chevy Monza, which ran on ethanol. Neat ethanol. By law, there’s a neat ethanol pump at every one of Brazil’s 37,500 or so filling stations, so it wasn’t like I had to go to MapQuest to find the stuff. 

And since the car only went about 70% as far on a liter of ethanol as it did on a liter of gas, I was looking for a place to fill up fairly frequently. I’m convinced that, most of the time, that car saved me money (even if it cost me more stops to fill up.) You’ll note I said most of the time. That’s why the rule of thumb is that, mile for mile, ethanol is the better buy until ethanol prices get above 70% of gasoline prices.

But it wasn’t until the introduction of flex-fuel cars, which could take any blend of neat ethanol and gasoline, that there was much of anything Brazilian motorists could do about it. Like me, if you had an ethanol-burning car, you couldn’t just fill it up with gasoline—or vice versa.

Most new cars sold these days are flex, and one industry association says that, by next year, fully half of all cars on Brazilian roads will be able to run on any blend of gasoline and ethanol.

Affordable options

The problem motorists here in Brazil have been facing is when neither option is affordable, like right now. The last I checked, gasoline (which, by the way, is all a 25% ethanol blend to start with) here in the town where I live is not such a good buy, with ethanol prices hovering at just 69 percent of the gas price. The problem, though, isn’t the percentages: it’s the flat numbers. With gasoline right now at $6.76 a gallon, that 69% price for ethanol still comes out to be a whopping $4.66 per gallon.

Part of the reason ethanol is so high is that the new cane harvest has barely gotten under way. It's why Brazil recently took the step of importing corn ethanol from the United States: some 18.5 million gallons of it, to help stanch price jolts as motorists waited for the new cane harvest.

Which is probably the main reason the government fuels agency wants to get $1.85 billion in loans made for the building of ethanol stocks. Last year, a similar amount of money was made available for distilleries to build storage capability, but only about a third of the money made it into actual stock-building loans.

Brazil may have to think about getting its own ethanol demand met, and pump prices stabilized throughout the year, before it tries to bite off a piece of the potentially enormous U.S. ethanol market. Until then, they may have to keep bringing in U.S. corn ethanol between cane crops. And I will have a long wait before going back to that old ethanol-burning Chevy Monza seems like a good idea.

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