A surge in global oil prices is raising concerns about diesel supplies in Brazil at a critical time for agriculture, as farmers move the soybean crop and plant winter crops. The squeeze is also strengthening the biodiesel industry’s push for the government to raise the mandatory blend to 16%.
Oil prices approached $110 a barrel this week amid the latest developments in the Middle East war, widening the gap between diesel sold by state-controlled Petrobras and imported fuel to about $0.58 per liter (3 reais) in September, according to fuel importers’ association Abicom. The gap was about $0.50 (2.56 reais) per liter in August.
Importers have been postponing purchases as the gap widens, Abicom said. Brazil imports about 25% of the diesel it consumes because domestic refining capacity is insufficient to meet demand.
The situation is fueling supply concerns during key months for Brazilian agriculture. Farsul, the farm federation in the southern state of Rio Grande do Sul, sent a letter to the ANP, Brazil’s oil and biofuels regulator, warning about delivery delays that could disrupt summer-crop planting and hurt yields.
Higher diesel prices are also directly increasing farmers’ production costs.
A federal subsidy of about $0.19 (1 real) per liter, announced Sept. 9, must quickly translate into adequate supply, regular deliveries and lower prices, Farsul said in its letter to the ANP.
Biodiesel Gets Cheaper
The rise in international diesel prices has widened the discount of biodiesel to fossil diesel, bolstering the industry’s case for accelerating a move to a 16% mandatory biodiesel blend, known as B16. The increase had been scheduled for March.
Biodiesel is now more than $0.39 (2 reais) per liter cheaper than fossil diesel at the distributor level, after freight and taxes.
Abiove, Brazil’s vegetable-oil industry association, and biofuels producers’ group Aprobio estimate that adopting B16 would trim diesel prices at the pump by about $0.004 (0.02 real) per liter, from roughly $1.54 (7.92 reais) to $1.53 (7.90 reais). The calculation does not include the fossil-diesel subsidy announced this month.
Moving from a 15% to a 16% blend would also increase annual biodiesel demand by 750 million liters, according to Abiove. The group estimates that replacing imported diesel with additional biodiesel would have saved about $28 million (145 million reais) from August through December, assuming B16 had taken effect last month.
“Biodiesel plants have been investing to expand capacity to meet the demand expected under the Fuel of the Future law,” said Carlos Eduardo Hammerschmidt, vice president for new business, investments and institutional relations at Grupo Potencial, a fuel distributor and biodiesel producer in Paraná state. “But this is no longer just about the law. It’s about keeping the economy running.”
Some markets are already allowed to use biodiesel blends above the mandatory level. In July, the ANP authorized higher blends in sectors including public and rail transportation, shipping, captive fleets, and agricultural tractors and machinery.
Those volumes remain small, however, Hammerschmidt said. A nationwide increase in the mandatory blend would have a much larger impact.
Testing Bottleneck
In the short term, broader adoption of biodiesel depends on the completion of B16 testing. Hammerschmidt said advanced validation work at Instituto Mauá in São Paulo has shown the higher blend to be technically viable.
“Engine testing is well advanced, and the reports will be delivered to the government in February,” he said. “But the government could immediately issue a provisional measure raising the blend. This is an emergency moment, and the economy needs to keep running.”
In a joint statement to The AgriBiz on Wednesday, Abiove, Aprobio and biodiesel industry group UbraBio said the sector is mobilizing resources to complete the tests.
The groups said Brazil’s biodiesel industry has production capacity and inventories available to help ensure fuel supplies at a time when the country remains dependent on imported fossil diesel.
Brazil has substantial idle biodiesel capacity, Hammerschmidt said, while current soybean production and crush volumes are sufficient to meet the additional demand generated by a one-percentage-point increase in the mandate.
Paraná alone added four soybean crushing plants over the past year, increasing annual capacity by the equivalent of almost 1 billion liters, Hammerschmidt said.
Brazil has biodiesel production capacity of about 16 billion liters a year, a figure expected to reach 18 billion liters in 2027, while actual annual output is only about 6 billion to 8 billion liters, he said.
This story was translated from the original Portuguese with the assistance of artificial intelligence and reviewed by The AgriBiz editorial staff.
