By Bruno De Nicola, Contributing Reporter
RIO DE JANEIRO – The price of biofuel has risen by more than twelve percent over the past two months. A liter of alcohol, that had an average cost for fuelers of R$1.55 (US$ 0.80), now stands at around R$1.75. The strong rise is forcing drivers to ditch biofuel and opt for gasoline, despite its significantly higher price per liter (R$2.59).
The sudden change represents a unusual phenomenon in the history of Brazilian fuel. Since the advent of alcohol, its sales have always registered a positive trend: last year’s records marked a 42 percent increase. 88.3 percent of Brazil’s vehicles are powered by biofuel, thanks to the boost of total-flex engines, machines that can run either on gasoline or alcohol.
Twleve percent in sixty days is quite a rise for price-sensitive drivers such as those millions of Brazilians who struggle to get to the end of the month. In fact, the financial variation managed to scare off quite a few fuelers and it will probably frighten them even more in the next days. According to the The National Petroleum Authority (ANP) prices are set to rise again from around three to four percent in November.
For those who may not be familiar with the Brazilian biofuel situation, alcohol or ethanol is sugarcane derived. It is used as a fuel but also as a fuel additive. Gasoline sold in Brazil contains at least 25 percent anhydrous ethanol. Due to its natural origins, the price variation of alcohol and gasoline in the country is strictly tied to agricultural trends.
José Carlos de Oliveira, President of Sindipostos (Gas Stations’ Union) in Ceará, believes that “there are two different reasons” for such a steep rise. Bad weather appears to be the first: strong rainstorms in the southern and southeastern regions of Brazil are causing many problems for sugarcane farmers, who are forced to dump their crops. The other reason seems to stem from the fact that ethanol is not the only mass-consumed sugarcane-derived product: sugar and cachaça (Brazilian rum) come from the same plant.
The sugarcane industry, just as every other economic sector, is based on costs and profits, and its production shifts according to the market’s needs. At the moment, sugar profits seem to be much more attractive than their ethanol equivalents. The hard focus on the natural sweetener is causing a ethanol shortage in the market, as supply is far below demand and prices are consequentially rising.
Brazilian drivers all over the country are ditching alcohol and filling up on gasoline, despite its higher price. The reasons behind their willingness to put up with greater expenses, (R$2.59 per liter instead of R$ 1.75), derive from two technical matters. The first is that total-flex engines register a better performance if running on gasoline. The second factor is related to maintenance: total-flex engines register a shorter durability if running on ethanol.
Since the difference in price between a liter of gasoline and one of ethanol has become so slim, Brazilian drivers have shifted their interests from low-budget fueling to performance and durability.