When is pure ethanol attractive as a fuel option? Quantifying the gasoline vs ethanol dilemma faced by consumers in Brazil
2011 (English)In: Journal of Academy of Business and Economics, ISSN 1542-8710, Vol. 11, no 3, 109-115 p.Article in journal (Refereed) Published
The Brazilian light vehicle fleet runs mainly on two energy carriers: Gasoline and Ethanol (E100). While inBrazil bioethanol is used both as a low blend with gasoline (E20-25) and in a pure, separate option(E100), a large share of the fleet is flex-fuel capable, meaning cars can take pure ethanol, gasoline or anymixture of both. The choice on which fuel to use depends on consumer preferences when presented withboth choices at the pump. Previous research indicates that prices are a major factor influencing the fuelchoice at any given moment. Gasoline prices were relatively stable between 2005 and 2011, whileethanol prices experienced strong fluctuations based on sugarcane harvest seasons, suboptimalregulatory stocks and increasing demand due to the rising share of flex-fuel cars as well as exports to theUS and European Union markets. Therefore, depending on relative prices between ethanol and gasoline,the consumer appears to decide on the economic attractiveness of each fuel. The limit ratio betweenethanol and gasoline prices is considered to lie between 0.6 and 0.7 (due to different energy content andengine efficiencies characteristic to ethanol and gasoline). This study enhances previous investigationson consumer behavior in face of high biofuels blends, in form of an in-depth statistical analysis of thechoice phenomenon. The study focuses on the price-trigger which leads to fuel shift based on demandand price data from the Brazilian Agency for Oil, Natural Gas and Biofuels (ANP), the Ministry ofAgriculture and the Brazilian Statistical Institute (IBGE) for the period between January 2005 and January2011, with monthly resolution. Relative prices and consumption between ethanol and gasoline priceswere calculated for all 27 Brazilian states (1971 observations). The analysis proceeded in form ofcorrelations and non-linear regressions in order to determine the quantitative reaction from the market inface of different price variations faced by consumers at the pump, in different seasons of the year. Theresulting regressions from the Brazilian case serve as a tool for policy-makers to seek efficient biofuelspromotion strategies, which specially guarantee the economic sustainability of the competing fuels,specially the attractiveness of biofuels when used as high-blends.
Place, publisher, year, edition, pages
USA: International Academy of Business and Economics , 2011. Vol. 11, no 3, 109-115 p.
Consumer choice, quantification, ethanol, gasoline, flex fuel, Brazil
Research subject SRA - Energy
IdentifiersURN: urn:nbn:se:kth:diva-48310OAI: oai:DiVA.org:kth-48310DiVA: diva2:457398
QC 201111232011-11-172011-11-172015-04-01Bibliographically approved