Biodiesel Blend With Diesel Fuel May Damage Engines and Raise Fuel Prices, Say Organizations Representing Over 200,000 Companies in the Sector

The Increase of Biodiesel Blend in Diesel Will Raise Costs for Cargo and Passenger Transport and Result in Higher Product Prices for Brazilians

The increase in the biodiesel blend in diesel has worried entities that represent more than 200,000 producing, distributing, importing, selling, and transporting companies, as well as industries related to diesel consumption. According to them, there are serious problems in the quality standard of the fuel sold today, which could lead to an increase in fuel prices, in addition to causing malfunctioning of diesel engines.

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The increase in the percentage of biodiesel blend in diesel will raise costs for cargo and passenger transport and result in higher product prices for Brazilians. It will also plunge the country into a scenario of technological stagnation, impact the development of the automotive industry and equipment, and compromise service provision.

The entities emphasize that starting next year, new pollutant emission limits will come into effect in Brazil with the adoption of more modern vehicle technologies, for which there is no experience with elevated biodiesel levels and that require a reduction in the content and significant changes in biodiesel specifications.

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The group reports that recent increases in biodiesel in diesel have generated problems of crystallization, hygroscopicity, low filterability, and biodiesel sludge formation, which consequently causes damage to machines and engines; decreases lifespan; and reduces equipment performance, in addition to increasing maintenance costs and harming various sectors of the economy and Brazilians.

How Is Biodiesel Produced?

Moreover, high levels of biodiesel in diesel promote an increase in nitrogen oxides, hydrocarbons, and carbon monoxide emissions, with negative impacts affecting human health and the environment, as well as raising fuel consumption, generating even more emissions and additional costs, which are transferred to the entire population.

This does not take into account the environmental impacts of more frequent disposal of hazardous contaminant products such as sludge, filters, mechanical parts, among others.

Demand for Ethanol and Gasoline Plummets While Diesel Consumption Soars in Brazil

The crisis caused by the coronavirus, which led to mobility restrictions, along with the surge in fuel prices, caused demand for ethanol and gasoline to plummet in Brazil in March. Diesel, on the other hand, despite suffering price hikes even with the PIS and Cofins taxes frozen by the Government, exhibited completely opposite behavior, due to sustained demand from sectors such as agriculture and transportation.

Diesel demand exhibited an opposite behavior compared to gasoline and ethanol, reaching 1.13 million barrels per day in March alone, representing a significant increase of 125,000 barrels per day compared to the previous month. The above information comes from the Latin America Oil Report by S&P Global Platts Analytics.

Reduction of Biodiesel in Fuel May Backfire and Trigger Industry Bankruptcies and Unemployment

The Government’s measure to reduce biodiesel in fuel may impact industries that expanded their operational capacities counting on high demand, and consequently generate unemployment, since the biodiesel production chain employs over 1.5 million people.

About 80% of the biodiesel consumed in the country is produced from pure and recovered soybean oil, whose production stimulates the production of soybean meal, the main input for the feed chain – which, in turn, feeds birds, fish, and pigs. The consequent impact on inflation will affect society as a whole, including the sectors that today intend to benefit from the fuel reduction at the pump. In other words, the intervention may backfire.

An economic analysis conducted by GO Associados, led by Gesner Oliveira, former president of the Administrative Council for Economic Defense (Cade) and Sabesp, indicates that the reduction may lead to the bankruptcy of companies that made investments and increased their production capacity relying on the schedule of the National Energy Policy Council (CNPE), defined by a resolution in October 2018, which was suddenly modified on Wednesday, the 14th, during the auction of the product that will be put on the market in May and July. “This is a measure that goes against several aspects of public policy. The climate summit is very illustrative. At this moment when there is a worldwide effort and which should be national, to reduce emissions, it makes no sense to interrupt a schedule that had already been established,” Oliveira told VEJA.