Direct sale of ethanol patina and does not reduce fuel prices

Supported by President Jair Bolsonaro (PL) as an alternative to reduce fuel prices in the country, the sale of hydrated ethanol directly from the plants to the gas stations had almost zero market share in its first two months.

For fuel distributors, the low adherence reinforces the thesis that the measure will not have a great impact on the market. Ethanol producers complain that the current model creates legal uncertainty and, therefore, sales have not yet taken off.

According to a survey carried out by consultant Dietmar Schupp, based on data from the ANP (National Agency for Oil, Gas and Biofuels), this modality represented 0.14% of ethanol sales in November and 0.21% in December.

Sales operations are concentrated in the Northeast and Central-West regions, which hosted 100% of the contracts of this type in November and 86% in December.

According to ANP data, ten mills sold products directly to service stations in the first two months of the new rule. In the period, the volume sold in this modality totaled 3.9 million liters, in a total market of 2.3 billion liters.

The direct sale of hydrous ethanol to gas stations was approved by the ANP in November, as part of a package of measures that promised to increase competition in the sector, including the possibility of selling gasoline from other brands by gas stations.

At the time, the topic was also being discussed in Congress, based on an MP (provisional measure) presented by Palácio do Planalto. The MP was approved in December and, in January, sanctioned with several vetoes by Bolsonaro.

One of the main supporters of the change, Sindçucar (Sindicato da Indústria do Açúcar in the State of Pernambuco) believes that Bolsonaro’s vetoes weakened the proposal, leaving the issue regulated only by the ANP.

The president vetoed the two articles of MP 1063 that dealt with the subject, arguing that the ANP regulation already guaranteed the operations.

“We need more legal stability”, says the entity’s president, Renato Cunha.

According to him, there are currently negotiations with the Civil House for a solution, which may come with the inclusion of the topic in another MP that deals with the fuel market or with the edition of a new MP exclusively on direct sales.

Cunha argues that, with clearer rules, operations of this type tend to grow. “For now, sales have suffered due to insecurity,” he says.

Sought, the Civil House did not respond to the request for an interview on the subject.

The president of Sindçu also argues that the start of direct sales was hampered by the drop in ethanol consumption in the country. With fewer sales, the price of fuel has been falling since November, even in an off-season.

According to data from Cepea (Center for Advanced Studies in Applied Economics) at Esalq/USP, the price of hydrous ethanol at the plants in São Paulo has dropped 22% since the beginning of that month.

“While estimates of sugarcane harvest and ethanol production for 2022-23 are increasing, the latest consumption figures show disappointing sales,” says consultancy S&P Global Platts.

At the pumps, however, the price of hydrous ethanol was practically stable between the last week of October 2021 and last week, going from R$5,066 to R$4,938 per liter, according to the ANP’s weekly price survey.

Faced with the drop in consumption, S&P Global Platts cut its forecast for growth in national consumption of Otto cycle fuels, those used by light vehicles, for 2022 from 1.9% to 0.5%.

The consultancy, however, expects some price recovery in the coming weeks, when the recent drop in prices should reach the pumps and start to boost consumption.