Ethanol fuel in Brazil > Effect on oil consumption
Tuesday, July 1st, 2008Most automobiles in Brazil run either on alcohol (E100) or on gasohol (E25) since the government made mandatory the use of 24% ethanol in the blend sold in the entire country.
Since 2003, dual-fuel (“Flex-Fuel”) or full flex-fuel vehicles that run on any proportion of ethanol and gasoline have been gaining popularity, reaching 5 million new cars and light commercial vehicles by March 2008, and 72% of car manufacturing production is dual-flex without additional cost for buyers.
Customers have 49 models available to chose from. Brazilian full flex-fuel vehicles have electronic sensors that automatically detect the type of fuel and the blend mix, and accordingly adjust the engine combustion. Users have the freedom to choose depending on the free market prices of each fuel.
Due to the lower energy content of ethanol fuel, full flex-fuel vehicles get fewer miles per gallon. Ethanol price has to be between 25-30% cheaper per gallon to reach the break even point.
Since 2005, ethanol prices have been very competitive without any subsidies, even with gasoline prices kept constant in local currency since mid-2005, at a time when oil was just approaching USD 60 a barrel. The price ratio between gasoline and ethanol fuel has been well above 30% during this period, except during low sugar cane supply between harvests. According to Brazilian producers, ethanol can remain competitive if the price of oil does not fall below USD 30 a barrel.
Presently the use of ethanol as fuel by Brazilian cars – as pure ethanol and in gasohol – replaces gasoline at the rate of about 27,000 cubic metres per day, or about 40% of the fuel that would be needed to run the light vehicle fleet on gasoline alone.
In 2006 ethanol represented almost 20% of total fuel consumption in the road transport sector when trucks and other diesel-powered vehicles are considered.
However, the effect on the country’s overall oil use was much smaller than that: domestic oil consumption still far outweighs ethanol consumption. In 2005, Brazil consumed 2,000,000 barrels of oil per day, versus 280,000 barrels of ethanol. Although Brazil is a major oil producer and now exports gasoline (19,000 m³/day), it still must import oil because of internal demand for other oil byproducts, chiefly diesel fuel (which cannot be easily replaced by ethanol).
According to government statistics Brazil produced 17.471 billion litres of ethanol in 2006, 23 billion litres in 2007 and in 2008, the Companhia Nacional de Abastecimento (Conab), expects a production growth around 14.97% and 19.46%, bringing the total ethanol production ranging from 26.45 to 27.9 billion litres.