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Ethanol Demand From Distributors Is the Lowest in 20 Years
In recent months, there has been a decline in the demand for ethanol at gas stations due to the high price compared to that of gasoline. As a result, a chain reaction is being created, leading to a decrease in the price of ethanol at the pumps.
The outcome of the current situation was also verified by the fuel-producing plants – in January, the industries in São Paulo sold the lowest volume of hydrated ethanol for the month in 20 years to distributors, according to a survey by the Center for Advanced Studies in Applied Economics (Cepea/USP).
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The survey also indicated that the volume traded in the first month of 2022 is the lowest since 2002, and an even smaller quantity was recorded in November 2021. Compared to December, the volume of ethanol traded was 17% lower in January of this year.
As drivers have preferred gasoline over ethanol, distributors reduced their purchases of the latter, resulting in elevated stock levels at the plants. Consequently, producers are lowering prices, and gradually, this reduction is reaching end consumers.
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According to data from the Sugarcane Industry Union (Unica), the price of hydrated ethanol sold by plants in the Rio Preto region decreased by 6% in the first week of February, compared to the last week of January. Thus, at gas stations, the price per liter of ethanol is already the lowest it has been in the last five months.
Antônio de Padua Rodrigues, technical director of Unica, points out that the reduction in the volume traded by producers has been gradually increasing since September. According to him, the decrease is so significant that the stocks of the plants exceed demand, which is why prices are falling daily – to enhance the competitiveness of ethanol and restore favorable demand.
Other Factors Driving the Decrease in Ethanol Prices
Among the main reasons for the current decrease in ethanol consumption are the economic slowdown, the impact of the Omicron variant of COVID-19, and the current fuel prices, which are influenced by external markets.
“This drop in demand for ethanol, and for other fuels in general, is mainly due to the price increase driven by international oil prices, as well as the appreciation of the dollar against the real,” stated Jacyr Costa Filho, President of the Superior Council of Agribusiness (Cosag) of Fiesp.
Economist Luciano Nakabashi from the School of Administration and Economics (FEA) of USP points out several reasons that contributed to the increase in ethanol prices in 2021, such as crop failure due to climate factors, greater allocation of planting for sugar production, and stagnation in production volume.
Increase in Ethanol Prices Represents a Disadvantage
The drop in sales volume of hydrated ethanol is justified by the price of the biofuel at the pumps compared to gasoline. In recent months, the price relationship between hydrated ethanol and gasoline at gas stations in the city of Rio Preto has made the fossil fuel the more favorable option – in January, the ratio was 74.8%. According to the National Agency of Petroleum (ANP), in the last month, the average price of gasoline was R$ 6.101/liter, and that of hydrated ethanol was R$ 4.568/liter.
In February, it’s possible to find the price of gasoline per liter at R$ 6.009 and that of ethanol at R$ 4.349, which represents a ratio of 72%. According to analysts, it is advantageous to refuel with ethanol only when the price per liter is less than 70% of the gasoline price.
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