Drivers in Brazil have the following choices when they fill up: gasoline with a 25% additive of sugarcane-based ethanol; pure sugarcane-based ethanol, or diesel – which also has an ethanol additive).
As can be seen, sugarcane-based ethanol plays an important part in the country’s vehicle fuel matrix. And as a result recent price rises in ethanol have caused concern.
The Sugarcane Growers Union of São Paulo (União da Agroindústria Canavieira do Estado de São Paulo) (Unica) says that price rises of sugarcane-based ethanol have been caused by a sharp jump in demand.
Unica is calling on its members to anticipate this year’s harvest and drive prices down (the harvest normally begins in April or May).
A note from Unica, released last week, declared that it believes that as much as an additional 850 million liters of ethanol could enter the market if sugarcane growers anticipate the 2006 harvest.
"This will alleviate market pressure and restore price equilibrium," said the note.
The announcement by the Brazilian government that it will reduce the amount of sugarcane-based ethanol added to gasoline from 25% to 20% in order to head off problems with ethanol supply and reduce pressure on its prices will inevitably have a collateral effect: it will mean an increase in gasoline consumption.
Brazil’s state-run petroleum giant, Petrobras, stepped into the picture yesterday and announced that it will be able to guarantee gasoline supplies even if there is a rise in consumption.
Paulo Roberto Costa, director of Supply and Refining, declared that there will be no problem ensuring that there is enough gasoline for the domestic market. "We will just reduce the amount of gasoline we export," he said.
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