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Ethanol Falters in Brazil

Ethanol, especially in its purest Brazilian sugarcane form, was supposed to be the route to clean fuel and energy independence. Not so fast. The Financial Times reports that market pressures in Brazil, the 2nd largest producer of biofuels after the U.S., are pushing the price of ethanol above that of gasoline:

In short, drivers generally choose ethanol because it is cheaper, not because they are trying to save the environment.

The government follows a similar logic it seems. Edison Lobão, Brazil’s mining and energy minister, this week reduced the ethanol component in petrol from 25 per cent to 20 per cent….

The reasoning this time is that ethanol has become so expensive recently that it is pushing up the price of ‘petrol’ at the pumps. By reducing the ethanol component, petrol should be a little cheaper. By freeing up ethanol supplies, it should also make pure ethanol cheaper.

Throw in the massive oil discoveries off the Brazilian coast and the price of gasoline relative to ethanol should continue to move downward:

Aside from serving as a mind-boggling case study of supply and demand, the government’s latest decision may also be a glimpse of the future.

Brazil’s state oil company, Petrobras, is currently sitting on an estimated 50bn barrels of oil in the ‘pre-salt’ area recently discovered off the coast of Rio de Janeiro.

When this starts hitting the domestic market, it is hard to believe that ethanol will remain as popular as it is today. Like Brazilian drivers, when the government stops to compares prices, perhaps it will just as easily opt for fossil fuels over the environment.

So far no one has found a silver bullet solution to energy concerns. Ethanol, once touted by greens as just such a solution, presents myriad other problems as Amazon jungle is cleared for cane plantations, fertilizer runoff fouls waterways, and the price of food staples rises dramatically leading to unrest in key countries around the world.  Now that the “successful” Brazilian model is unable to compete with gasoline on price despite massive government subsidies, it may be time to rethink the role of renewable biofuels in future energy production.

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  • Robert

    This is particularly upsetting because the United States has enormous supplies of low cost natural gas that can lower our dependence on Middle East oil, jump start the American economy, attract international capital and reduce our trade deficit. Of course the Obama administration is still trying to block the obvious benefits of natural gas, all in the name of “green energy”, whatever that is. The Best & The Brightest, Version 2.0.

  • Luke Lea

    The law of unintended consequences. If we want cleaner energy here in the U.S. — to say nothing of greater energy independence — then fracking is the future.

    I read somewhere recently that many thousands of these natural gas wells have been dug with only a small handful of mishaps, most notably contamination of an aquifer used for drinking water somewhere in Pennsylvania. It was a freakish accident, but to read the NYT you would think it was the most predictable thing in the world.

    Of course the oil companies are shooting themselves in the foot by resisting requests to identify the harmless “chemicals” that they pump into the ground to fracture these gas shales because they want to protect their “trade secrets.” A stupid loosing strategy which the greens will exploit to the max. Tin ears vs. the alienists.

  • soul

    Rather disappointing to read. Of all the alternative energy sources in production that I thought had a chance, sugarcane ethanol was it.

  • Jacksonian Libertarian

    It’s not a choice between Fossil Fuels or the Enviornment, unless you buy into the Global Warming [nonsense].

  • Kris

    “Aside from serving as a mind-boggling case study of supply and demand”

    Is “mind-boggling” the next “unexpectedly”?

  • jack

    This is odd. I was in Sao Paolo, Brazil two weeks ago and pure Ethanol was about 60% of the price of gasoline at the pump. Gasoline was pushing $9.00/gallon and pure ethanol was about $6/Gallon. I would not trust the veracity of this article.

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