Ethanol Price Soars Alongside Gasoline; Sugar and Exports Make Biofuel More Expensive

With Ethanol and Gasoline Prices Soaring, Filling Up with CNG Remains Advantageous Even with Petrobras’ 39% Increase, Says Copergás

High gasoline prices are not the main villain for the rise in ethanol prices; the biofuel, even being produced in Brazil and in reais, has also risen and become just as expensive. This is due to exports and also because the price of sugarcane has become more attractive, with a larger share of the input being directed to sugar production.

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Those who need to fill up their cars at the pump won’t have much choice if gasoline prices have risen significantly, driven by pressures such as the dollar and global oil prices; ethanol prices have not lagged behind.

Last Monday (5), Petrobras announced a 39% increase in the selling prices of Compressed Natural Gas for distributors. Starting in May, CNG, the main option for drivers who travel many kilometers per day and want to avoid rising gasoline and ethanol prices, will also affect Brazilians’ wallets; however, even with the adjustment, filling up with Natural Gas will still be advantageous, says Copergás.

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Even with Soaring Prices, Gasoline Has Become More Advantageous than Filling Up with Biofuel

Even with soaring prices, in much of the country, gasoline has even become more advantageous than biofuel: the reference rule is that a liter of ethanol, which provides less energy, should cost up to about 70% of the price of a liter of gasoline for consumers to travel the same distances at the same cost using either. This proportion may vary slightly depending on each car’s performance.

The good news is that both fuels have started to become a little cheaper in recent days, although the decrease does not come close to compensating for the increases both have already accumulated: since the beginning of 2021, the average price of gasoline at gas stations in the country has risen 19%, while ethanol prices have gone up 21%. Over the course of a year, gasoline has risen by 27% and ethanol by 28%.

Gasoline and Ethanol Are Hitting Historical Highs at the Pumps

Currently, gasoline is sold at an average of R$ 5.45 per liter, with prices exceeding R$ 6 in some states, according to a weekly survey conducted by the National Petroleum Agency (ANP). Ethanol, on the other hand, reached R$ 4 for the first time in March and is now sold for R$ 3.88 per liter, also considered the national average collected by the Agency.

Prices can vary significantly from state to state, depending on regional taxes and the distance from major producing hubs. On average, a liter of ethanol is costing 71% of the price of gasoline, at the limit of the margin where it becomes less advantageous.

More Exports and More Sugar

The Brazilian oil company Petrobras is responsible for almost all gasoline production consumed in Brazil. The state-owned company uses the price of oil and the dollar to adjust fuel prices; thus, as both commodities have soared in the past year, Brazilian gasoline and diesel prices have also skyrocketed.

But if ethanol is an entirely national product made from sugarcane and has nothing to do with oil, why did its price rise in the same way?

With more attractive sugarcane prices, a larger share of the input has been directed to sugar production, which reached 38.46 million tons. The volume of ethanol was 30.37 billion liters, including anhydrous ethanol (which is mixed with gasoline before reaching gas stations), hydrated ethanol (sold directly at stations), and ethanol derived from corn — which amounted to 2.57 billion liters. In the last harvest, the supply was 33.25 billion liters, a historic record for the sector.

As a substitute for gasoline, in addition to competing with sugar since it is produced from the same sugarcane, ethanol also competes at the pumps with gasoline, as drivers can choose either to fill up. That is why the price of one reflects the price of the other, even though they have completely different cost structures.

“The rise in gasoline prices generates a greater demand for ethanol, which results in increased prices,” explains the technical director of the Sugarcane Industry Union (Unica), Antonio de Padua Rodrigues. “In the first quarter, increases in gasoline prices generated greater consumer demand for the biofuel, during the off-season, which pressured ethanol prices.”