Gasohol Industry

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Gasohol Industry

Gasohol is the term for varying blends of gasoline and ethyl alcohol (ethanol) and can also describe any mixture of other petroleum fuels containing ethanol or methanol. In the United States, ethanol obtained from corn was used after the fuel shortage in the aftermath of the Arab oil embargo (1973–1974). The real story of gasohol as an industry, however, dates back to World War I in Brazil, with the production of ethanol from sugarcane for use in gasohol. Another spurt of mandated gasohol use occurred during the worldwide depression of the 1930s and again during World War II, because of uncertain oil supplies, but gasohol use evaporated in the 1950s with the availability of low-cost oil from the Middle East. It was not until the October 1973 oil price explosion coincidental with war in the Middle East that renewed attention was paid to renewable fuels. Brazil had to respond to balance-of-payments problems due to rising costs of oil imports, which significantly constrained economic development. In 1975 the country launched the largest initiative in the world to produce ethanol. The National Alcohol Program—Proálcool—had technical, economic, and social consequences. It created new technology in refining, agriculture, and transportation. It saved hard currency by reducing oil imports while creating new jobs, improving workers' incomes overall, and reducing pollution.

The oil crisis had been the catalyst for Proálcool, but developments in the sugar industry were also seminal. In that period, traditional cane sugar exports were declining with falling world prices. The replacement of sugar with ethanol production displaced imported oil and reduced world sugar supplies. Moreover, sugarcane has a highly favorable energy balance when ethanol is produced. Processing is self-sufficient because the caloric value of generated bagasse is sufficient to provide more than the fuel for refinery operations. The Brazilian Ethanol Producers' Special Committee reported that solar energy on one acre of sugarcane yields an average of 602 gallons of ethanol, while the same energy on one acre of corn yields only 375 gallons.

After the first decade, Proálcool, though remaining controversial, created over 2 million jobs directly and indirectly. Wages increased throughout Brazil; rural migration into urban centers was stemmed; higher-yield sugarcane varieties were developed; better management improved soil use and distillery processes and gave a higher yield of fermentation.

Gasohol in Brazil contains as much as 80% ethanol; undiluted ethanol is also used in vehicles with specially adapted engines. In its various forms in Brazil, where it is known as álcool, it is a national achievement. It has increased the domestic content of fuels, displaced imported oil (saving an estimated $8.5 billion on oil imports with subsequent annual savings exceeding $1 billion), and provided benefits for workers and industry. Ethanol is a renewable, but expensive fuel; government subsidies to offset high production costs were required to make gasohol competitive in established gasoline markets. The required subsidy depends on the price of petroleum. The oil price collapse in 1986 made the gasohol subsidy an economic catastrophe for the Brazilian government. In the late 1980s ethanol-fueled cars held 90 percent of the market, but demand fell sharply in the 1990s. After that, production costs fell and the investment paid off. Brazil is considered to be at the forefront of alternative energy. When oil prices rose in the twenty-first century, Brazilian consumers turned to the less expensive álcool and gás. Many converted their cars to run on mixed fuels. In addition to the cheaper conversion kits, "flex-fuel" cars that run on gas or ethanol have been available since 2003. As of 2007, 40 percent of the fuel used by cars in Brazil came from ethanol. High oil prices, war in the Middle East, and environmental distress have focused international attention on Brazil's forward-thinking energy policies, bolstered by an agreement between the United States and Brazil to expand global energy markets for ethanol-based fuel.

See alsoEnergy .


Dario Scuka, The Economics of Gasohol (1979).

Steven J. Winston, Ethanol Fuels: Use, Production and Economics (1981).

The Royal Society of Canada, International Symposium on Ethanol from Biomass, Winnipeg, Canada, 13-15 October 1982.

Harry Rothman, Rod Greenshields, and Francisco Rosillo Calle, The Alcohol Economy: Fuel Ethanol and the Brazilian Experience (1983).

World Bank, Economic Aspects of the Alcohol Programme (1984).

R. Serôa Da Motta, A Social-Cost Benefit Study of Ethanol Production in Brazil, Department of Economics, University College London, Discussion Paper No. 86.02 (1986).

Michael R. Leblanc, Ethanol: Economic and Policy Tradeoffs (1988).

Comissão Nacional De Energia, Política de combustíveis líquidos automotivos (1988).

Dario Scuka, Ethanol Imports and the "Gasohol" Connection: Historical Background and Analysis in an International Perspective, 1978–1989 (1990).

Additional Bibliography

Audinet, Pierre. L'état entrepreneur en Inde et au Brésil: Économie du sucre et de l'éthanol. Montréal: l'Harmattan, 1998.

Barzelay, Michael. The Politicized Market Economy: Alcohol in Brazil's Energy Strategy. Berkeley: University of California Press, 1986.

Demetrius, F. Joseph. Brazil's National Alcohol Program: Technology and Development in an Authoritarian Regime. New York: Praeger, 1990.

Rotstein, Jaime. Brasilesclerose. Rio de Janeiro: Editora Nova Fronteira, 1993.

                                   Dario Scuka