Losing Ground to Oil, Brazilian Ethanol Struggles to Compete

Council of the Americas
Rachel Glickhouse
February 21, 2012

It’s a bittersweet moment for Brazil’s energy industry. With a steady stream of petroleum discoveries promising to make Brazil one of the world’s largest oil producers, the country is turning more to oil and gas as biofuels begin to languish. Brazil, one of the world’s ethanol-producing pioneers, began making the sugar-based fuel during the energy crisis of the 1970s as a cheaper alternative to gas. The country continued investing in the sector over the next three decades, making Brazil the number two ethanol producer in the world. Moreover, in 2003 Brazil introduced flex-fuel vehicles, which run on a blend of gasoline and ethanol, giving ethanol producers even more opportunities at the pump. But the tides have changed. Though a booming economy and growing middle class have pushed demand for cars to an all-time high, ethanol production is at a low. The government is heavily invested in developing the oil market after major petroleum finds and a 45 percent increase in oil production from 2002 to 2011. Last year, Brazil produced the largest amount of hydrocarbons in its history, with 768 million barrels of oil and 24 billion cubic meters of natural gas.

Read more