Expensive ethanol leaves drivers with no option to fill their tanks

An alternative for drivers in times of expensive gasoline, hydrated ethanol has remained at high price levels and is currently only competitive in five Brazilian states. For experts, the scenario reflects product supply restrictions and the mills’ search for higher margins.

According to data from the ANP (Agência Nacional do Petróleo, Gás e Biocombustíveis), the average price of fuel at Brazilian gas stations returned to around R$5 per liter, where it was for 15 weeks between October 2021 and January 2021. 2022

The scenario puts fuel among the main villains of inflation. In 12 months, the price of ethanol rose 24.59%, according to the IPCA, the country’s official inflation index. In the same period, the price of gasoline rose 27.48%.

The rise in recent weeks is unusual, as prices tend to fall with the proximity of the sugarcane harvest, which begins in April, and reflects the transfer to the pumps of the increase in fuel prices at the mills in São Paulo, a benchmark for prices in the country.

In the last four weeks, the price of ethanol in the plants of São Paulo rose 17%, according to data from Cepea (Center for Advanced Studies in Applied Economics), from Esalq/USP. On average, hydrous ethanol was sold to distributors in March for R$3.1204 per liter, 11.7% higher than in February.

In its latest monthly bulletin analyzing the indicator, Cepea states that the supply of fuel is low and there was an increase in demand in March with stations renewing stocks to meet the high demand of the Carnival holiday.

Data from Unica (União da Indústria de Cana de Açúcar) indicate that ethanol production fell by 8.9% in the 2021/2022 harvest, compared to the volume produced in the previous harvest. In addition to the preference for sugar production, the drought that hit the Southeast and Center-West regions hampered production.

Industry executives also say that mill owners tend to raise prices when gasoline is more expensive to improve margins. “The price of gasoline at the pump goes up, the price of ethanol goes up too. The producer wants to earn more. This is natural”, says consultant David Zylbersztajn, former director of the ANP.

With gasoline expensive, the demand for ethanol heats up, which also helps to put pressure on prices at pumps, with the search for better margins at service stations.

Unica says that there was a rush of distributors for the product in the months of February and March, which ended up affecting inventories. “There was a shock of demand without the counterpart of supply”, argues the technical director of the entity, Antonio de Padua Rodrigues.

Between January and February, according to data from the ANP, hydrous sales rose 10%. Pádua says that the movement continued in the following month, given the good competitiveness of ethanol. “The available stock was not enough for this type of demand”.

He points out, however, that the supply of ethanol tends to increase from the second half of April, when the plants begin to process the new crop. “It’s a very short-term issue,” he says. The sugarcane off-season runs from December to March.

With the increase in pumps, using hydrated ethanol today is only advantageous in producing states, such as São Paulo, Minas Gerais, Mato Grosso and Mato Grosso do Sul, and in Piauí. In these states, the average price of ethanol is less than 75% of the average price of gasoline.

In all others, it may be better for the consumer to fill up with gasoline, even with the current high prices after the mega-increase promoted by Petrobras almost a month ago — according to the ANP, the average price of gasoline in the country was R$ 7,202 per liter last week.

In Amapá, far from the main producers, hydrous ethanol costs more than gasoline: the average price of the former last week was R$6,540 per liter, while the second was R$6,331 per liter.