This year, the rising cost of oil has cast a shadow over global energy prospects, but Brazil is an exception. For the Brazilian energy sector, 2024 marks a historic milestone. The government predicts that Brazil will achieve its first-ever energy balance this year, meaning that fuel imports and exports will essentially cancel each other out. This achievement is largely due to a record-breaking ethanol production from sugarcane.
Ethanol has significantly reduced Brazil’s reliance on oil, replacing nearly 40% of the country’s gasoline consumption. Moreover, Brazil's proven oil reserves have also grown in recent years, adding to the nation’s energy security. In Brazil, where the population exceeds 185 million, most gas stations offer three fuel options: ethanol, regular gasoline, and premium gasoline. Gasoline is even blended with 20% ethanol, making it more affordable than pure gasoline. Ethanol costs around $0.53 per liter, while regular gasoline in São Paulo recently reached $0.99 per liter.
With flex-fuel vehicles now in their third year of widespread adoption, major car manufacturers in Brazil are planning to make all new cars flexible-fuel by the end of the year. "I only buy gasoline when there's no other option," says Alexei Rigueira, a 28-year-old taxi driver in São Paulo who drives a Chevrolet that runs on both ethanol and gasoline. Natural gas is also available at many stations across the country.
President Bush highlighted ethanol as a potential solution to the U.S.’s heavy oil dependence. As a result, American lawmakers and investors have been visiting Brazil to explore how the country’s experience could shape the future of U.S. energy policy. “In recent months, Americans have shown more interest in our model,†said Edeldo Cavajo, chairman of the São Paulo Sugar Cane Producers’ Federation. “We’ve had U.S. politicians visit, and we were invited to speak before the Senate Foreign Relations Committee.â€
Brazil’s ethanol journey has not been easy. Over the past 30 years, it has evolved through trial and error, shaped by unique political and economic conditions. In 1975, after the military government took power, Brazil launched a nationwide ethanol program. At the time, 90% of the country’s oil was imported. The government provided subsidies to sugarcane farmers and required gas stations in towns with over 1,500 people to install ethanol pumps. By the early 1980s, almost all new cars ran on ethanol.
However, in the following decades, Brazil transitioned to democracy, oil prices dropped, and subsidies were cut. Sugarcane mills shifted back to sugar production, leading to ethanol shortages and a decline in ethanol-powered vehicle manufacturing. “We went from one extreme to another,†recalls Henry Joseph Jr., head of engineering at Volkswagen (Brazil). “Ethanol vehicles fell from 90% of production to less than 1%.â€
Despite these setbacks, research continued. The São Paulo Sugar Technology Center, established in the 1970s, focused on improving ethanol efficiency, including genetic research on sugarcane. With limited funding, scientists worked tirelessly to advance the industry. “We didn’t have much investment, but through hard work, we created a better environment,†said Jaim Fingulut, head of R&D at the center.
The recent rise in oil prices has once again made ethanol attractive. By the early 2000s, Brazilian ethanol producers managed to cut costs from $0.60 to $0.20 per liter. With gas stations still offering ethanol, the re-emergence of ethanol became economically viable. In 2003, Volkswagen introduced Brazil’s first flexible-fuel car, followed by GM and Ford.
“Transitioning from internal combustion engines to electric is challenging,†said Henry Joseph. “Flexible fuel vehicles offer a practical solution by using existing infrastructure and allowing quick switching between fuels.†Many Brazilian drivers have become experts in calculating fuel efficiency, knowing that ethanol provides about 70% of the energy of gasoline, so it needs to be at least 30% cheaper to be a good choice.
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