Brazil, which has long prided itself on achieving energy independence, will be unable to meet its domestic light vehicle demand for fuel as soon as 2017 if recent trends continue, a new report from Bloomberg New Energy Finance concludes. By 2021, demand could outstrip supply by as much as 9-12 billion litres per year, equivalent to 20 per cent of Brazil's demand. The country must either make substantial new investment in sugarcane ethanol production or gasoline refining, or it must allow diesel light vehicles on the roads. It was not long ago that Brazil met the majority of its light fuel demand with ethanol produced from sugarcane. This was in part due to a boom in capital investment for new ethanol projects, which reached US$6.4 billion in 2008, but which dropped to just US$256 million in 2012, according to Bloomberg New Energy Finance data. Partly as a result, ethanol use fell to 40 per cent in 2012, from a high of 54 per cent in 2009. Meanwhile, the country maximized its domestic gasoline production in 2012, importing almost four billion litres of gasoline as a result. “It was not long ago that Brazil was in a position to boast about nearing energy independence, in large part because of the strong growth of its ethanol sector,” said Salim Morsy, Bloomberg New Energy Finance lead analyst for biofuels in Latin America and the author of the white paper. “But investment has slumped since for a variety of reasons, making the country increasingly dependent on foreign gasoline refiners. It's a costly and potentially untenable position, and it puts Brazil far off track as far as its energy security goals are concerned,” he added. The use of diesel fuel could help address the looming shortfall, but Brazil currently prohibits the sale of diesel-fueled passenger vehicles. Passenger vehicles account for more than two thirds of all vehicles on the roads. Motorists are therefore restricted to gasoline, ethanol or some combination of the two – a popular option driving the number of ‘flex-fuel' vehicles on Brazil's roads. One alternative open to Brazil is to boost domestic ethanol production through further investment. Bloomberg New Energy Finance estimates that by 2020, at least 14 billion litres of additional anhydrous ethanol production capacity would be needed to fill the domestic fuel supply gap. Brazil could increase its ethanol cane crushing capacity by more than a third (287m tones) by 2021 to address the gap, but this would require around US$28 billion in new investment in 2012 currency. BN
