US - Brazil Ethanol Partnership

Today's edition of USAToday has an article about the US and Brazil entering into a partnership to increase the production of ethanol for use in automobiles.

Over the years I have had a lot of Americans ask me about alcohol car use. I keep hearing these wild numbers given in the press and for the most part, they are not true.


The US and Brazil together produce about 70% of the world's ethanol. Both countries want that to increase to weaken dependency on foreign petroleum. Last week President Lula was in Washington to discuss this and President Bush will be here next week. Pretty much everyone in South America wants this to happen except Hugo Chavez. He says that Bush's trip here is "destined for the depths of defeat".

Brazil started producing ethanol for fuel in 1975 under the direction of General Emilio Garrastazu Médici during the time the military ruled the government. His idea was to break our dependence on oil as petroleum was not yet being produced here. Now Brazil is 100% independent for most fossil fuels other than diesel and some petroleum bi-products.


While most US ethanol comes from corn, ours is from sugar cane. It is relatively cheap to produce and process. Ethanol production has created over 1 million jobs in the country.


In the beginning, ethanol sold for about 1/3 the price of gasoline. This was an incentive to get more Brazilians buying alcohol burning cars because a gasoline engine cannot burn pure ethanol safely. Today's Brazilian gasoline is a mixture of 76% gasoline and 24% ethanol and cars seem to have no problem.

The early ethanol cars caused a lot of problems. This is a picture of a 1992 Chevrolet Opala Dipolomata. Our first car in Brazil was just like one this except is was a 1988 model. Back then they didn't change much from year to year. There is very little difference between the 1992 model and the 1972, the first year it was produced.


Because ethanol is harder to ignite than gasoline, our car had a small 1 liter gas tank under the hood that would be injected into the carburetor to help it start. On cold mornings (50 degrees or so), even the gasoline wouldn't help. As soon as we were able we sold that car and bought one that burned gasoline. I've never owned another ethanol car.


In 2003, they began introducing flex engines that will burn ethanol or gasoline. In 2004, 11% of new cars were produced with flex engines. A year later the number jumped to 80%. This year Fiat has introduced a new car with that not only runs off ethanol and gasoline but also natural gas.


The main problem I have with ethanol is the price gouging that is going on here. It is extremely less expensive to produce ethanol than gasoline but the price is nearly the same.

I stopped by my local BR station and took a photo of their price board. You have to understand those prices are in Reias (pronounced hey-ice) and are for liters, not gallons. Here is a conversion:


Regular Gasoline - R$2.58/ltr = US$4.57/gal
Super Gasoline - R$2.62/ltr = US$4.65/gal
Premium Gasoline - R$3.00/ltr = US$5.32/gal
Ethanol (Alcohol) - R$1.799/ltr = US$3.19/gal
Diesel - R$1.989/ltr = US$3.52/gal


Don't cry to me about what you are paying at the pump! It looks like ethanol is a great deal less expensive than gasoline but the numbers are deceptive because ethanol produces 30% less miles per gallon than gasoline. That makes the cost of the ethanol jump to US$4.19. While that is still a significant savings, you can buy alcohol for human consumption at roughly the same price.


At one point in the mid 90's, ethanol was more expensive to run than gasoline so manufacturers all but abandoned producing alcohol engines. Not until the flex engines were introduced was there a significant rise in production.


Taxes and greed have caused the price of ethanol to be nearly double what they should be. Natural gas costs less than half to operate and many people are converting their cars, though the cost is high and prohibitive for most Brazilians.


I think ethanol is a great alternative and the infrastructure is in place for it to continue to grow and develop. If the government would convince the ethanol producers to lower their prices to close to where they should be, Brazil will see tremendous growth in this industry and become a world leader in renewable fuel sources and that is not even including bio diesel, which is quickly on the rise.


Check out the article in USA Today. I think you will find it interesting.

http://www.usatoday.com/news/world/2007-03-01-us-brazil-ethanol_x.htm