Energy Tribune

Last month, George W. Bush traveled to Sao Paolo to discuss, among other things, the prospects for increasing the amount of Brazilian ethanol that can be provided to the U.S. market. During a March 9 speech there, Bush said that “as we diversify away [sic] from the use of gasoline by using ethanol we’re really diversifying away from oil.”

He went on, saying that “we all feel incumbent [sic] to be good stewards of the environment. It just so happens that ethanol and biodiesel will help improve the quality of the environment in our respective countries.” During his visit, Bush signed an ethanol-focused agreement that calls for Brazil and the U.S. to increase their work on biofuels, with increased investments and technology exchanges.

Predictably, the mainstream press bought the hype. The same day Bush was in Brazil, the Wall Street Journal ran a front-page story looking at the booming ethanol trade in Latin America. It said that encouraging ethanol output was a “top energy priority” for Bush and that he was “encouraging alternative sources such as ethanol.” A few days before Bush got to Brazil, The Economist declared that “ethanol diplomacy” would “be a focus of Mr. Bush’s Latin American tour.” In February, the Washington Post ran a story that the U.S. and Brazil were considering a partnership that would encourage ethanol use in Latin America and thereby “diminish the regional influence of oil-rich Venezuela.

Amid all the hype, something has been lost: perspective. Yes, Brazilian ethanol may be cheaper than domestically produced corn ethanol. And yes, the 54 cents-per-gallon tariff on Brazilian ethanol is perhaps the most egregious example of protectionism and provincialism in America’s convoluted energy policy. But none of the journalists covering the Brazilian ethanol question has bothered to look at just how much energy is actually involved in the ethanol trade. Nor have they bothered to examine the scope of Brazil’s ethanol production.

A serious reality-check is in order. First and foremost, Brazil is not the epicenter of ethanol, the U.S. is. In both 2005 and 2006, the U.S. produced more ethanol than Brazil. Further, U.S. production is growing by 20 percent per year; Brazil’s ethanol production between 2005 and 2006 was essentially flat. In 2005, ethanol supplied about three percent of the volume of gasoline used in the U.S. In Brazil, it supplied about 40 percent.Those numbers reflect the countries’ huge disparities in both population and vehicles. Brazil has just 23 million automobiles. The U.S. has more than ten times as many, and 110 million more citizens.

In 2006, the U.S. imported about 400 million gallons of ethanol from Brazil. That’s equivalent to about 17,482 barrels of gasoline equivalent per day, a relatively small amount of energy — particularly compared to America’s imports of Brazilian oil and oil products. And those imports are a direct result of the phenomenal success of Petrobras, Brazil’s state-owned oil company. Between 1997 and early 2007, the company’s oil production more than doubled and now stands at about 1.9 million barrels per day.

That jump in Petrobras’ oil output is reflected in America’s import data. In 2000, the U.S. was importing just 5,000 barrels of crude per day from Brazil. By 2006, that had jumped to 133,000 barrels per day. Brazil also provides a variety of oil products to the U.S., including petroleum coke and fuel oil. All told, in 2006 the U.S. imported 192,000 barrels of crude and oil products per day from Brazil. That’s about 11 times as much energy as it’s getting from Brazil in the form of ethanol.

In May 2006, Silicon Valley multi-millionaire Vinod Khosla and former Senate minority leader Tom Daschle published an opinion piece in the New York Times, in which they touted Brazil’s “energy independence miracle.” They conveniently failed to mention that Brazil’s oil production is ten times greater than its ethanol production.

Thus, while the media and Bush continue to obsess over ethanol, the real story is that Brazil has become one of the Western hemisphere’s most important energy producers. And that energy is coming from oil, not ethanol.