In the opinion of Brazilian professor Roberto Schaeffer, of the Coppe/UFRJ (Coordination of Postgraduate Engineering Programs at the Federal University of Rio de Janeiro) Energy Planning Program, the government should stay out of the ethanol price war going out in Brazil right now.
Schaeffer opposes what he sees as interference with a market that is experiencing a problem related to the inter-harvest period. Alcohol, he recalled, is an agricultural commodity, and its price is determined by the market.
The professor said that he is opposed to any kind of intervention in a sector which is in frank expansion around the world and which has aroused the interest of various countries as a result of the application of the Kyoto Protocol.
"With the appearance of flex-fuel cars (which run on either alcohol or gasoline), there is, for the first time, the possibility of a truly competitive market in terms of alcohol-powered vehicles. People can decide to fill up with alcohol or gasoline," he observed.
In Schaeffer’s view, the problem is a reflection of the inter-harvest period, and only the market can regulate the sector, at the proper moment, moreover.
"Right now petroleum prices are extremely high, and the sugar market is extremely interesting. Given the appeal of the world sugar market, mill owners can produce a little more sugar and a little less alcohol.
"It’s the market. That is why I disagree with the government’s idea of fixing alcohol prices. If the price goes up and consumers are dissatisfied, they now have the option to switch."
According to the professor, the increase in alcohol prices is even healthy, since it attracts investments to the country.
"This is clearly a moment when the international alcohol market is extremely stoked. What this means is that, with Russia’s ratification of the Kyoto Protocol last year and the protocol’s having taken effect in February, 2005, a large number of countries are seriously considering adding alcohol to gasoline. This is boosting alcohol exports, which amounted to 3 billion liters last year," he informed.
Schaeffer stated that he sees no problem with an agricultural commodity varying in price. "This applies to wheat and to coffee. Frost affects the price of either one. What’s the problem?"
He added: "This type of market intervention is unnecessary, even more so since we are talking about an item that is consumed by the middle class for personal transportation.
Diesel, which has an impact extending to public transportation, is one thing. A middle class fuel is another. In no way should it be a government priority to concern itself with a market that functions well. Prices rise and fall all over the world, and in no place is the price fixed."
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