Apr 20, 2010
Station Owners Exchanging Gasoline Pumps For Ethanol Pumps
Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.
The rapid increase in the amount of ethanol being consumed in Brazil is forcing gas station owners to remove tanks and pumps used for gasoline and replacing them with tanks and pumps used for ethanol. There are two main reasons for the surge in ethanol sales in Brazil. First, ethanol in Brazil is generally cheaper to use than gasoline and secondly, virtually all new cars in Brazil have flex fuel engines, which allows the consumer to choose between ethanol and gasoline depending on price of the two fuels. It is estimated that by the middle of 2011 half of all the cars on Brazilian highways will be flex fuel.
Many gas station owners are reporting that the demand for ethanol is so great that they are sold out of ethanol after long weekends and holidays. In addition to being cheaper, Brazilian consumers like the idea that sugarcane-based ethanol reduces pollution and greenhouse gas emissions by 60% compared to gasoline.
According to the National Petroleum, Natural Gas, and Biofueles Agency (ANP), the consumption of ethanol in Brazil increase nearly 600% between 2006 and 2009. To meet the increased demand, station owners are removing gasoline tanks and replacing them with ethanol tanks. A station owner in Cuiaba (the capital of Mato Grosso) commented that fifteen years ago he had three pumps for ethanol. About ten years ago he increased the number of ethanol pumps to 6 and now he is remodeling his station and putting in 10 ethanol pumps. New stations are being built in Brazil with the majority of pumps already designated for ethanol.
A new law in Brazil will also require changing the name on the fuel from alcohol to ethanol. The name change is an attempt to make ethanol more of a commodity that can be traded around the world. There are 240 stations in Mato Grosso and they have until September to make the name change.
The state of Mato Grosso has some of the lowest priced ethanol in Brazil and distributors and gas station owners are concerned that the production of ethanol in the state is not keeping pace with the increased demand. For the last three years, consumption of ethanol in the state has increased at 10% per year and it is expected to increase 8% again this year.
There are plans to build numerous new sugar/ethanol mills in the state, but it takes several years to plant the sugarcane, build the mill, and start production of ethanol. In the mean time, the state of Sao Paulo will remain the principal producer of sugarcane in Brazil responsible for approximately 60% of Brazil's total production. The state of Sao Paulo used to be known for its cattle production, but much of the pasture in the state has been converted to sugarcane production, so now it's known for its sugar and ethanol production.