Hydrous ethanol has become more competitive against gasoline in Brazil as prices continued to fall in the second week of May, driven by the sugarcane harvest in the country's Center-South region.
According to data analyzed by fleet management firm Veloe, the price ratio between ethanol and gasoline dropped to 69.7% in early May, down from 71.7% in late April. This falls below the critical 70% threshold typically used by owners of flex-fuel vehicles to determine the economic advantage of biofuel over fossil fuels.
A flex fuel car is basically a vehicle whose motor is made so it can run on ethanol, on gasoline, or on some blend of both, and honestly in any proportion. The real little “secret” behind this whole thing is the electronic control unit, also called the injection module. It can identify what fuel is being used and then it automatically tweaks the engine settings, so it aims for the best performance and efficiency. The world’s first mass-produced flex-fuel car was launched in Brazil in 2003: the Volkswagen Gol Total Flex 1.6. From that milestone, this know how spread pretty fast, picking up popularity among the big automakers that are already established in the country. Today, this type of vehicle can be seen everywhere in Brazil.
ETHANOL VS. GASOLINE COMPETITIVENESS
The deepening decline in ethanol prices, which began in mid-April, contrasts with the more moderate price adjustments seen in other fuels:
- Gasoline: Dropped 0.27% to an average of 6.76 reais per liter.
- S-10 Diesel: Decreased 1.27% to an average of 7.21 reais per liter.
"The market is closely monitoring the evolution of the harvest, alongside factors such as global oil prices, exchange rates, and the production mix between sugar and ethanol," Veloe, a subsidiary of Elopar (controlled by Banco do Brasil and Bradesco), said in a statement.
REGIONAL PRICE DROPS
The sharpest absolute price drops for ethanol were concentrated in Brazil's agricultural heartland, reflecting the impact of the ongoing harvest:
- Goiás: -4.9%
- São Paulo: -4.7%
- Federal District: -4.6%
- Minas Gerais: -4.2%
- Mato Grosso: -4.1%
Analysts suggest that the increased supply from the Center-South harvest is the primary driver behind these regional declines, providing relief to consumers and improving the biofuels' market share.
