Brazil Flex-Fuel Cars Help Tame Gasoline Prices

A massive new fleet of flex-fuel cars in Brazil has prevented state oil company Petrobras from charging more for gasoline despite record world oil prices, the company said Friday.

Petrobras downstream director, Paulo Roberto Costa, said consumers in Latin America’s largest country would stop buying gasoline and switch to cheaper ethanol if the price of the fossil fuel was raised to match world levels after being frozen since late 2005.
“It doesn’t make sense hiking the price of gasoline abruptly if it will cause me a bigger loss of the market than what is already happening today,” he told reporters. “It’s possible that this year we’ll sell more ethanol than gasoline in Brazil.”

Traditionally, Petrobras uses an argument that prices have not settled at a new threshold level yet and it cannot adjust key fuel prices during market turbulence. Costa echoed this stance, saying Petrobras believed oil prices of $110 a barrel had “a speculative element which doesn’t look sustainable”.

While it keeps the domestic price of diesel and gasoline unchanged, the oil giant, which also accounts for practically all refining in Brazil, regularly has been adjusting prices of other oil products like naphtha and aviation fuel.

Costa said flex-fuel vehicles, which can use any mixture of ethanol and gasoline or each of these fuels alone, already accounted for 20 percent of Brazil’s car fleet, while the number of single-fuel cars on the road was falling gradually.

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