• Categories
  • Archives

Unable to Keep Up with Demand Brazil Sharply Ups Fuel Imports Including Ethanol

Traffic jam in São Paulo, Brazil Brazilian oil production has failed to keep up with rising consumption, and the country saw itself forced to sharply increase its oil derivatives imports. That, in turn, has impacted strongly on the country’s trade balance with Arab countries.

Brazilian imports from Arab nations were close to US$ 7.4 billion from January to July, up 34% from the same period of last year according to the Brazilian Ministry of Development, Industry and Foreign Trade.

The hydrocarbon import bill stood at US$ 6.4 billion. Hydrocarbon purchases accounted for 87% of total imports and were up 43% in January to July 2012 from the same period in 2011.

According to specialists, the main reason is that Brazil’s automobile fleet has grown without a policy for increasing production and raising fuel prices.

Even though the government-owned Petrobras does not enjoy a monopoly over oil and derivatives imports, in practice it is virtually the sole importer, and owns practically all national refineries.

Besides, the company tends to follow the orders of its majority stakeholder, the government, and has been selling products domestically at prices lower than those paid on imports, which partly explains its billion-real loss in quarter two this year.

“Imports have covered virtually all of the increase in demand,” said economist Adriano Pires, director of the Brazilian Infrastructure Center (CBIE, in the Portuguese acronym) and former advisor to the National Petroleum Agency (ANP). “[Brazil’s] refining capacity is at its maximum,” he added.

Along similar lines, the director general of the Electrotechnics and Energy institute of the University of São Paulo (USP), Ildo Sauer, claimed that the government has encouraged auto manufacturing and sales by lowering taxes, ever since the 2008 international crisis set in, however it has failed to implement a policy for the fuel industry to keep up with the increase.

One example is the ethanol industry, which has grown negligibly, and now the country needs to import the product, which has been in large-scale use as fuel for over 30 years.

Sauer stresses that in order to be competitive, ethanol needs to cost less than 70% of the gasoline price to end consumers, because cars fueled with the biofuel burn fuel at a faster rate, although they perform better. It is worth noting that most autos made in the country are “flex fuel,” that is, capable of running on ethanol, gasoline, or any mixture of the two.

“The [market] imbalance can be ascertained from the fleet’s conversion into ‘flex fuel’ [which has taken place in the past few years],” said Sauer, a former Petrobras director.

He said that in the past, when ethanol prices were more competitive, a sizeable portion of drivers would fuel up with the product and the country would even export its gasoline surplus; now, the opposite holds true.

“It is an uncontrolled incentive; you get more cars congesting the cities and there is no coordination with other areas. The government has not done anything [as regards fuels], and it has dished the responsibility of solving the problem over to Petrobras. It is a chaotic system,” Sauer criticized.

Pires adds that the Brazilian agricultural output has increased sharply in the past few years, and much diesel is used up for fueling machines for planting, harvesting, and transporting the crop. The demand in this case was also catered for with imported product.

To the CBIE director, imports of oil derivatives will remain strong in the next few years, because national output will not increase fast. The next Brazilian refinery, Abreu e Lima, in the state of Pernambuco, is only due to enter into operation in 2014. “In the next four to five years, we are going to import a lot,” he said.

Arabs

The main items Brazil imports from the Arab countries, in addition to crude oil, are naphtha, aviation kerosene, liquefied natural gas (LNG) and diesel. Imports of all these products have increased significantly from January to July, both in value and volume, except for naphtha, which is used as a raw material by the petrochemical industry.

Sauer notes that the government and Petrobras have had good relations with the Middle East and North Africa countries for a long time now. “At the time of the second oil shock [in 1979], countries such as Algeria, Iraq, Iran, Libya and Saudi Arabia did not leave Brazil undersupplied,” he said. Of those, the only non-Arab nation is Iran. “There is a certain fraternity there, a mutual friendliness,” he said.

Anba

Tags:

  • Show Comments (0)

Your email address will not be published. Required fields are marked *

comment *

  • name *

  • email *

  • website *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Ads

You May Also Like

Brazil’s Varig Goes Earlier to Auction Block in Desperate Attempt to Survive

Brazilian authorities decided to advance to June the auction of Brazilian flag carrier Varig ...

Another Banner Year for Brazil’s Agriculture

The production of cereals, legumes, and oilseed crops – that is, peanuts, rice, beans, ...

Brazilian TV on the Divan

Reality shows in Brazil are already threatening the audience numbers for fiction on TV. ...

Venezuela-Brazil Gas Pipeline Is More Like a Pipe Dream

The Pharaonic trans-Amazon natural gas conduit whose concept was approved amid much fanfare by ...

P&WC to Power Brazil’s Embraer New Light Jets

Brazilian aircraft manufacturer Embraer has selected Pratt & Whitney Canada (P&WC) to provide engines ...

Brazil Signs Agreement with UN to Take Care of Its 7,000 Refugees

The Brazilian Federal Prosecution Service (MPF, in the Portuguese acronym) and the United Nations ...

Brazil Goes on the Offensive to Contain “Melting” Dollar

Brazilian market analysts project that by the end of the year the dollar should ...

Opposition in Brazil Wants Head of Finance Minister

Brazilian opposition party PSDB (Party of the Brazilian Social Democracy) filed a motion in ...

Brazil Consumers Happier with Present and Confident in Future

The confidence of Brazilian consumers in the economic situation of Brazil and Brazilian cities ...

Abbott Blinks First and Brazil Gets Its AIDS-Drug Discount

Some 23,000 people in Brazil use the AIDS drug, Kaletra, made by the Abbott ...