Brazil biodiesel producers ready to boost output amid diesel shortage fears

Brazil’s biodiesel producers are ready to increase output to prevent a major diesel supply shortage, João Henrique Hummel, who represents the sector's interests in the lower house, told BNamericas.

In September last year, the government decided to reduce the mandatory mix of biodiesel in diesel because of the high price of soy, the main raw material for the production of biofuel in the country.

According to Hummel, who is executive director at local consultancy Action, the sector is able to immediately meet national demand for the B12 mix and is getting ready for B15 as of March 2023, which is the original schedule for the biodiesel blending mandate.

“It’s a market that can be competitive and today we have almost 50% of our production capacity completely idle,” he said. “We’re putting the sector at the disposal of the government to solve the supply of diesel in Brazil, without any exchange rate impact.” 

Brazil imports around 30% of the diesel it consumes, and high oil prices combined with the depreciation of the real against the US dollar has contributed to double-digit inflation. 

Inflation has turned into a major election issue for President Jair Bolsonaro, who is trailing former president Luiz Inácio Lula da Silva in the polls for the October general elections, and he has pressured national oil company Petrobras to hold down prices at its refineries.

By taking long intervals to adjust its fuel prices, the NOC has harmed the competitiveness of local importers, threatening fuel supply in certain parts of the country.  

Petrobras increased prices for gasoline and diesel on Friday, which was 99 and 39 days, respectively, since the last hikes. 

“At a time when there’s talk of a worldwide diesel shortage, wouldn’t it be time to reduce the biodiesel mix in diesel?” Silvio Roman, biodiesel head at Delta Energia, said in an interview with BNamericas. 

Roman highlighted what he sees as the biodiesel sector’s benefits for the country, including employment generation, support for small farmers, and being environmentally friendly.

The mines and energy ministry (MME) declined to comment on the subject when contacted by BNamericas. 

On Thursday, the Petrobras board held an extraordinary meeting to assess issues related to fuel prices in Brazil and abroad. 

"Petrobras reiterates its commitment to the practice of competitive prices that are in balance with the market, while avoiding the immediate pass-through of external volatility and the exchange rate caused by conjunctural events," the company said in a statement. 

On the day after Petrobras’s price hikes, Bolsonaro said via Twitter that his administration was opposed to any increases of fuel prices.

Petrobras is a state-owned firm that should look out for the interest of the general public, but instead it is making “exaggerated profits” amid a world crisis, he said.

Bolsonaro also said that Petrobras could plunge Brazil into an economic chaos if it does not change course. 

"Its president, directors and board members are well aware of what happened with the truckers' strike in 2018, and the dire consequences for Brazil's economy and the lives of our people," he wrote.