By substituting sugarcane alcohol for gasoline, Brazil responded to soaring auto fuel costs with a home-grown solution---one the U.S. might well emulate.
After the OPEC oil shock of 1973 when the U.S. intensified its search for oil, reduced speed limits to 55 m.p.h., and levied a Gas Guzzler tax, the Brazilian government “ramped up its efforts to substitute sugarcane alcohol for gasoline” and met success, an authority on the subject writes.
Besides investing billions in new technology, Brasilia “provided cut-rate loans to sugar companies to build ethanol plants and guaranteed prices for the refined product,” writes David Daepp in the current issue of “The Long Term View” published by the Massachusetts School of Law at Andover.
Daepp, a Procurement Assistant in the United Nations Procurement Service, writes “Brazilian leadership had the foresight to avoid the sort of dependency that might have taken hold if it had relied on oil imports from more developed countries.”
“Brazilian consumers were made to feel a part of a grand movement toward a stronger Brazil while American consumers were standing in gas lines with no alternative in sight,” Daepp observed.
“The U.S. leadership used direct price intervention to sculpt consumer behavior whereas the Brazilian leadership focused on catalyzing a movement of aggregate consumer consensus by developing a whole new supply side (ethanol),” Daepp writes.
Ethanol is produced by yeast fermentation of the sugar extracted from feedstock such as corn, sugar beets and sugarcane, the best being sugar beets in terms of gallons of fuel per acre as it has the lowest water requirements to cultivate the crop.
Sugarcane, Daepp points out, yields 20 times the amount of ethanol as compared with corn. The ethanol is then refined to create a fuel called alcool sold at gas stations throughout Brazil “at almost half the price of gasoline depending on supplies of both substances.”
What’s more, the Brazilian government, Daepp writes, has thrown its weight behind “flex-fuel” vehicles(FFVs) “that can run on gasoline, alcool, or any combination of the two.”
“The U.S. government could similarly endorse domestic production of FFVs that would empower American consumers to hedge their own individual future risks arising in times of fuel shocks,” Daepp writes.
By extracting fuel from sugar beets and/or sugarcane, the author says, the U.S. could reduce production of corn for fuel purposes to the extent that it is endangering food supplies. It could also eliminate payments of $8.9 billion in direct subsidies to corn farmers such as taxpayers coughed up in 2005. And it could drastically slash the billions being spent annually by Washington to protect its supply of oil from the Middle East , a figure Daepp puts at $50 billion.
Daepp believes U.S. government-funded research could also develop new sources of ethanol from grasses, wood chips and cellulose found in trees and other plants, many of which that can be grown on land poorly suited for farm crops.
The U.S. currently imports 62 percent of its petroleum needs, the author points out, a figure projected to increase to 77 percent by 2025.
The author called for “greater access to the U.S. market for Brazilian suppliers of ethanol, as the current tariff of 54 cents per gallon on Brazilian ethanol imports along with the 51 cents per gallon subsidy on American ethanol heavily distort this energy alternative market.”
Daepp goes on to say, “This is where Washington needs to rethink the efficacy of domestic corn-based ethanol production and to go in the direction of the U.S. Energy Department’s $385 million investment in six biorefineries designed to convert cellulose into ethanol.”
The author notes that Henry Ford’s first working automobile was capable of running on ethanol, the substance that in 1925 Ford deemed “the fuel of the future.” The question American motorists might ask is, “When will the future come to America ?”
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