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Despite Oil Price Collapse, Ethanol Consumption May Continue to Favor Brazilian Drivers

Written by Paulo Nogueira
Published on 24/03/2020 at 07:13
Updated on 24/03/2020 at 08:54
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Despite the Collapse of International Oil Prices and the Latest Adjustments in Gasoline Prices at the Refinery Gate, Hydrated Ethanol – E100 – Still Technically Offers an Economic Advantage for Drivers in Southeast Brazil, Government Data Shows.

In the week ending Saturday, the price ratio of hydrated ethanol to gasoline was 70.16%, slightly above the 70.04% from the previous week, according to data released by the National Agency of Petroleum, Natural Gas and Biofuels (ANP) on Monday. Since January 6, E100 in Southeast Brazil has lost a minimal advantage of almost 2.11 percentage points in consumers’ wallets.

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Consumers with flex vehicles generally use hydrated ethanol only when the price is 70% of gasoline or less due to its lower fuel economy.

In 2019, the Southeast region accounted for nearly 50% of Brazil’s total hydrogen and gasoline consumption.

Hydrated ethanol is not losing its advantage over fossil fuel mainly due to the lag between Petrobras’ refinery pricing adjustment base and the moment retailers change their prices at the pumps.

Since January 1, Petrobras has reduced gasoline prices at the refinery gate by 34%, while the average price for consumers in the Southeast fell 1.46% from R$4.60/liter in January to R$4.53/liter on Saturday, according to ANP data.

Meanwhile, the average price of hydrated ethanol for consumers rose about 0.5%, an extremely weak correlation with the factory gate price so far in 2020.

S&P Global Platts’ assessment of hydrated ethanol from the Ribeirão Preto plant dropped 9.56%, from an average price of R$2.51/liter in January to R$2.27/liter on Monday.

If the coronavirus outbreak had not begun to reduce Brazilian fuel consumption, sales of hydrated ethanol would have maintained a good pace, despite the turmoil in international oil markets.

Brazil’s largest distribution companies expect fuel consumption to fall nearly 10% in March and another 30% in April due to the ongoing coronavirus lockdown.

Paulo Nogueira

Graduated in Electrical Engineering from one of the country's technical education institutions, the Instituto Federal Fluminense - IFF (formerly CEFET), he worked for several years in the offshore oil and gas, energy, and construction sectors. Today, with over 8,000 publications in online magazines and blogs on the energy sector, the focus is to provide real-time information on the Brazilian job market, macro and microeconomics, and entrepreneurship. For questions, suggestions, and corrections, please contact us at informe@clickpetroleoegas.com.br. Please note that we do not accept resumes at this contact.

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