Ethanol In Brazil

By Scott C. Lucas|22 February 2006

Demand and prices are climbing for ethanol in Brazil. Already, ethanol accounts for 37% of the fuel used in passenger cars, in great part because Brazilian law stipulates that every gallon of gasoline sold in the country contains 25% ethanol.

Of the 9.4 billion liters of ethanol used between January and November 2005, 4.1 billion were purchased by owners of alcohol-powered or flex-fueled vehicles, estimates the US Department of Agriculture’s Foreign Agriculture Service (USDA-FAS), the remaining 5.3 billion being purchased as gasoline additives.

Strongly supported by the government, both by its 25% mixing law and by incentives offered to owners of flex-fuel cars including a tax break, ethanol is expected to increase in usage in the country.

Sugar Cane To Increase
In the second half of 2005, demand reached all-high levels for ethanol, and as stocks became drained, prices spiked. By January 2006, the average price for ethanol was more than 70% higher than the average gasoline price in five of Brazil’s 12 largest states. One of the methods the government hope to keep prices down is through a re-investment in sugar cane production (a necessary ingredient for ethanol).

To prevent further shortages and price hikes, strong support will be offered by government to the sugar cane industry, as well as other industries that play a role in ethanol production.