As price of ethanol skyrockets, minister says government is not to blame

Minister of Mines and Energy, Edson Lobão, says that neither the government nor its state-run oil company, Petrobras, is responsible for the high price of Brazil’s sugarcane-based ethanol.

“The government has not raised prices of anything [ethanol or gasoline] for over two years. The last time Petrobras made an adjustment was over two years ago when it lowered prices,” declared the minister. “The problem is that the market freely sets its own prices.”

At the moment, the price of Brazil’s ethanol at the pump has reached a historical high and because of the so-called “energy ratio,” is simply uneconomical throughout the country [ethanol provides 30% less energy (or, to put it another way, 30% less mileage) than gasoline, so it has to cost 30% less than gasoline to be economical]. In the state of São Paulo, ethanol is over 83% the price of gasoline (up to 70% of the price of gasoline ethanol is economical).

Over the last month, the price of ethanol at the pump has risen 12.1%. However, because of the size of Brazil and transportation costs, the price of ethanol can vary as much as R$1 per liter at the pump (gasoline prices can also vary so that at the moment there are places where ethanol prices are only just above 70% the price of gasoline).

The average nationwide price of a liter of ethanol for the week of February 27 to March 5, was R$1.95, and a week later it had risen to R$2.19. But the average price is misleading due to the huge variation. For example, in Paraíba, it costs R$1.89 per liter (a little over 70% the cost of gasoline), while in Brasilia it costs R$2.89 (almost the same as gasoline).