Domestic Fuel

Ethanol pump at a Petrobras station in Sao Paulo

With a shortfall of sugarcane due to excessive rain, Brazil’s Agriculture Minister Reinhold Stephanes announced that they are considering reducing the amount of mandatory ethanol blended with gasoline. Today, all stations are required to sell gasoline mixed with a minimum of 20-25 percent ethanol. If enacted, the change could take effect as soon as this week but Stephanes has not disclosed what the new percentage will be.

Above average rainfall plagued Brazil over the past few months, slowing down the harvest, and ultimately, some sugarcane was left in the field. Consequently, the region of Sao Paulo, the number one producing state of both sugarcane and ethanol, saw its ethanol production numbers down by 8.3 percent compared to last year. According to UNICA, (Brazilian Sugarcane Industry Association) the region will product 5.86 billions gallons from this harvest.

The rain has also caused ethanol prices to rise at the pump leading to a reduction in hydrated ethanol sales, a trend that began surfacing in June 2009. According to UNICA, this reduction, “is a consequence of higher hydrous ethanol prices at the pump resulting from a combination of weather-related difficulties during the harvest and the approaching inter-harvest period which normally lasts from December to April the following year.”  In addition to Brazil being “energy independent,” the country also boasts the largest fleet of flex-fuel vehicles in the world.