Now that gasoline has risen in price once again, many Brazilians are turning their attention to ethanol. The fuel is produced from sugar cane, an abundant product in Brazil, but its value is subject to market regulation, which prevents it from being even cheaper.
Recently, gasoline increased in price by almost 19% at refineries, raising the average price of the fuel by more than R$ 7,00 at service stations, practically at the same time that ethanol dropped 8,85%, making this option more advantageous in some Brazilian states. The alcohol, as it is popularly called, does not emit carbon monoxide and is derived from a product abundant in Brazil: sugar cane. Despite the power that the country is in the production of this raw material, the ethanol sales system is subject to market regulation.
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Market regulation, in practice, is what maintains ethanol stocks. The price of fuel derived from sugar cane follows the increase in gasoline. That is, if alcohol becomes too cheap, everyone will buy it and it may run out. Therefore, to prevent this from happening, the way out developed by the market is to keep the readjustments upwards.
On the other hand, taxes on imported ethanol will be zeroed by the end of 2022. The reduction to zero of the rates was announced on Monday (21st) by the Ministry of Economy. The tax will be zeroed as soon as the measure is published in the Official Gazette.
“We are defining a reduction to zero of the import tariff for just over seven products by the end of the year. That doesn't solve inflation, that's with monetary policy, but it generates an important incentive”.
Statement by the Executive Secretary of the Ministry of Economy, Marcelo Guaranys
Can gasoline also be cheaper with the measure of zeroing taxes on imported ethanol?
The Ministry of Economy claims that zeroing tariffs on importing ethanol will make the price of gasoline drop by up to R$ 0,20 at gas stations, because a liter of gasoline has 25% anhydrous alcohol. Ethanol has an import tax of 18%
The price of gasoline rose very quickly, due to the war between Russia and Ukraine in Eastern Europe. The Russians are at the top of the list of oil exporting countries, which is the raw material for gasoline.
Flex vehicle drivers who want to know what is the best choice between gasoline and ethanol, it is necessary to make a calculation about the price of the two fuels.
Ethanol is 70% as efficient as gasoline, so what you have to do is divide its value by that of gasoline. If the result is greater than 0,7, it means that alcohol is costing more than 70% of the price of gasoline. However, if the result of the division is less than 0,7, then it is more interesting to consume ethanol.
Sugarcane harvest in 2022 and expectations for further reduction in ethanol prices
The sugarcane harvest begins on April 2022, 2022. And the expectation is that the production of the product should recover in 2023/XNUMX. The projection is from Center for Advanced Studies in Applied Economics at the University of São Paulo (Cepea), in a positive expectation of more favorable weather and higher productivity of Brazilian sugarcane fields, compared to the 2021/2022 season, which ends on March 31.
Therefore, if the expectations of a favorable climate at the beginning of 2022 come to pass, there will be an increase in the production of sugar and mainly ethanol, with more supply. According to USP's Luiz de Queiroz College of Agriculture, the 22/23 sugarcane harvest should reach values between 530 million and 578 million.
In the last harvest, sugarcane production varied between 516 million and 520 million tons registered by the National Supply Company (CONAB) and by the Sugarcane Industry Union (Única).
