Why Is Brazil Ahead of the US…fuel

by cactus

Fuel and the Free Market: Why Is Brazil Ahead of the US When it Comes to Cars that Run on Something Other than Gasoline?

In the last year or so, before the price of oil dropped, there was a bit of interest in finding ways to reduce our dependence on oil, and on “alternative fuels” and sources of energy.

Here’s the interesting thing – in Brazil, today, if you feel like it you can buy a vehicle from any of the major manufacturers that is tri-flex. That is, your vehicle will run on gasoline, ethanol, or natural gas. When you’re running low on fuel, you figure out which gives you more miles to the buck real on that day and that location and fill up on whatever is cheapest. The same car will run on any of the three fuels, and on pretty much any mix of gasoline and ethanol.

As an aside – ethanol in Brazil is a real, viable option, unlike the hoax that’s perpetrated on the American public. Ethanol in Brazil comes from sugar cane, which grows like a weed at the side of road in many places and contains a lot of sugar, which is what you need to make alcohol. Furthermore, what else are you going to do with sugar cane, if not make sugar and/or alcohol? Put another way – if there’s anything sugar cane isn’t like, its, well, corn.

Now, you may be wondering – how come the Brazilians have tri-flex fuel cars? Why will GM and Ford and Volkswagen sell those vehicles in Brazil but not in the US? Wouldn’t having such vehicles help reduce our dependence on oil? Heck, forget even about gasoline and ethanol – the US and Canada are among the largest producers of natural gas in the world, and as a result, the price of natural gas is lower in the US than most places in the world. Why don’t we even see vehicles running on natural gas, other than the odd city bus or garbage truck in random municipalities?

The answer is a simple but unpleasant one. See, we in the US would label the way that Brazil got to that point by an epithet: socialism. It makes no sense to label it socialism – the policies that today allow Brazilians to purchase vehicles with technology you won’t see in the US for at least a decade, and probably a lot longer, have their origin with Brazil’s military dictatorship, which could better be described as fascist than socialist.

Around the time of the oil embargo, countries around the world looked at ways to reduce their dependence on Middle Eastern oil. Brazil was no different, and it cast its eyes on alcohol. I believe the government went so far as to decree that by a certain date, some percentage of new vehicles sold had to run on alcohol. (Back then it was either alcohol or gasoline – the technology wasn’t there to allow you randomly mix the two fuels in the same gas tank like they do today.)

But… and here’s the key question – even if alcohol is cheap and plentiful in Brazil, how do you get Brazilians to buy cars that run on alcohol when there are no service stations selling alcohol? (Put another way – even though natural gas is cheap and plentiful in the US, how do you get Americans to buy cars that run on natural gas when there are no service stations selling natural gas?) In Brazil, the answer is simple: ensure that there are service stations selling natural alcohol. (In the US the answer is even simpler: you don’t.) The usual suspects at the time (Exxon, Texaco, Shell) ran gasoline stations in Brazil at the time. But so did Petrobras, the giant Brazilian oil company. But Petrobras was state owned at the time, so the government could simply decide to have it sell alcohol as well. And it did. As I recall (I was living there at the time) – it was some time in the late 70s or early 80s.

In any case, when it comes to fueling up one’s car, Brazilians have choices. They’ve had choices for decades. And nowadays, they have even more. Americans have no such choices. I imagine the free market will eventually provide a solution in the US. Maybe. But its clear that sometimes the free market, left to its devices, provides fewer and worse choices – i.e., provides less of a free market – than what we here in the US like to call “socialism.”
by cactus