Petrobras Urged to Boost Ethanol Output as Prices Jump, Minister Says

Brazilian Mining and Energy Minister Edison Lobao said he ordered state-run oil producer Petroleo Brasileiro SA to boost ethanol output and stockpiles to ensure supplies after the biofuel’s priced soared.

Petrobras will raise production and build up enough stockpiles in two years to help the government keep prices and supply in check, Lobao said in a program broadcast live on TV and radio today. The government increased financing to ethanol and may propose the fuel, which is made from sugar cane in Brazil, be regulated by the National Petroleum Agency, he said.

“We’re studying several measures to guarantee ethanol supply to drivers,” Lobao said. “I ordered Petrobras to enter more strongly in production and become a regulating agent in the ethanol market.”

The government is seeking to stem a 23 percent price jump in ethanol prices and supply shortages after rising sugar prices last year led mills to produce more sweetener than fuel. Cosan SA Industria & Comercio, which controls the world’s largest sugar-cane processor with Royal Dutch Shell Plc (RDSA), fell the most in 10 months in Sao Paulo trading yesterday amid concerns that the government may intervene in ethanol production.

Ethanol reached a record 1.694 reais ($1.07) per liter in the Paulinia distribution hub in northern Sao Paulo state on March 23, after doubling in a year, according to the University of Sao Paulo’s Cepea research unit index. It has since fallen, declining to 1.419 reais per liter yesterday. One liter is equal to about a quarter of a gallon.

Price Control
President Dilma Rousseff and Lobao have prevented Petrobras from raising gasoline prices at its refineries on bets oil will “reach stability,” the minister said. Crude oil climbed above $111 in New York for the first time in 30 months today and is 30 percent higher than a year ago.

Brazil’s annual inflation rate rose more than expected in March to 6.3 percent compared with a year earlier, close to the upper 6.5 percent limit of the government’s target range, the national statistics agency said yesterday. The central bank raised the benchmark lending rate by 50 basis points at each of their two meetings in 2011 to 11.75 percent in a bid to curb price increases.


By Katia Cortes - Apr 8, 2011 1:48 PM CT