Brazil May Use Biodiesel as an Alternative to Diesel for Vehicle Fueling and Should Reduce Imports of This Fuel

In Response To Possible Diesel Supply Crisis In The Country In The Coming Months, The Brazilian Government May Start Using Biodiesel As An Alternative To Fuel For Vehicle Supply And Reduce Imports Of The Product. 

The international diesel scenario remains unstable due to the increasing risk of resource shortages in countries, and to circumvent this situation, Brazil may use biodiesel as an alternative for the supply of vehicles. This Monday, (06/13), a reduction in fuel imports is expected as a result of the new solution to control domestic stocks and avoid shortages in the second half of the year.

Diesel Crisis May Reach Brazil And The Use Of Biodiesel As An Alternative For Supplying National Vehicles Is The Best Solution To Overcome The Problem

The scenario of diesel commercialization and production is becoming increasingly unstable in the international market due to the high prices charged following the conflicts between Russia and Ukraine and a constant risk that US supply will be reduced due to hurricanes in the Gulf of Mexico. Thus, the national government needs to increasingly seek measures to circumvent this situation and prevent a possible fuel shortage from occurring in the second half of the year.

Therefore, the most viable alternative at the moment is the use of biodiesel, a biodegradable fuel derived from renewable sources such as vegetable oils and animal fats, for the supply of national vehicles, as well as the reduction of product imports. Thus, there may be a blend of the two fuels for use in vehicles such as trucks over the coming months.

Furthermore, the expectation is that the blend of biodiesel in diesel will increase considerably over the second half of the year, potentially rising from 10% to 15% to control domestic stocks.

Another important point of the alternative for the national market is that by using biodiesel to address the diesel crisis in the country, fuel prices may increase significantly. While this may seem like an unfeasible decision, it could prevent national shortages and keep stocks until the international market stabilizes. However, using more biodiesel would require crushing more soybeans in Brazil instead of exporting them, tightening supply and threatening to worsen rampant food inflation.

Increase In The Use Of Biodiesel For Vehicle Supply Could Strongly Reduce Fuel Imports In Brazil

In addition to ensuring diesel stock in Brazil by using more biodiesel in fuel, the national government may also reduce the import of the resource. This is because an increase in the blend could reduce diesel imports by five ships per month from the typical 20 to 30 ships, according to estimates from Pedro Shinzato, a petroleum analyst at StoneX. Thus, the country would begin to focus on new alternatives, as the supply of fuel abroad is not favorable.

Although this is a viable alternative, the issue of vegetable oil production could become a problem since biodiesel requires these resources. This is happening because the demand for soybean oil has been increasing amid falling palm oil exports from rivals due to protectionist measures, and sunflower oil due to the war in Ukraine.

Thus, there could be a deficit in internal supply and external commercialization of these products.

So far, the Ministry of Energy has not commented on the possible diesel shortage, and the National Petroleum Agency said it is evaluating viable alternatives to avoid a national crisis, but that nothing has been decided yet regarding the issue.