Ethanol demand shifts as Brazil increases gasoline ethanol blend

The economic advantage of ethanol for flex-fuel vehicle drivers in Brazil is shifting due to changes in gasoline composition. The mandatory inclusion of anhydrous ethanol in gasoline has increased, moving from E27 to E30 and now to E32. Because ethanol has a lower energy content per liter than gasoline—approximately 22.36 MJ/l compared to 32.24 MJ/l—increasing its proportion in the gasoline blend reduces the overall energy available per liter of gasoline.

This change alters the traditional ‘70% rule’ used by consumers to decide between fuels. Based on energy content, the new E32 blend suggests that ethanol remains competitive until it reaches approximately 78% of the price of gasoline.

According to an analysis by BTG Pactual, demand for hydrated ethanol is beginning to react after nearly four months of favorable pricing. Low inventory levels, which fell below the 10-year historical average, suggest that prices for the biofuel may rise by approximately R$ 0.35 per liter to restore the price correlation with gasoline seen a year ago.