Oil, ethanol prices climbing; Chavez tightens oil policy

The price of ethanol in Brazil leaped upward last month, surging by 14.2 percent, the largest single-month increase in more than three years. Concerns about supply and rising demand from flex-fuel vehicles fueled the increase, according to Brazil’s monthly inflation survey.

The rising prices and supply worries during the time between sugar cane harvests have caused the government to weigh restrictions on ethanol exports this year, and that could affect supply to the U.S.

Platt’s Oilgram reported the Brazilian government last month warned sugarcane producers of ethanol it may cut back their exports if domestic prices continue to climb. At the beginning of this month, a liter of ethanol cost about 93 cents at the pump on average versus $1.20 for gasoline.

About three-quarters of new car sales in Brazil are flex-fuel vehicles. They can burn either sugarcane ethanol or the standard gasoline blend, which is about 20 percent ethanol.

Platt’s said analysts expect about a billion liters of new ethanol to reach the market this month, but it is uncertain how much ethanol may be available for export. Last year, Brazil shipped approximately 2.4 billion liters of its 15.4 billion liter output to other countries, including the U.S. Brazil plans to produce 16 billion liters of ethanol this year, but analysts said Brazilians may use more than 14 billion liters of that amount.

This country may face competition for the fuel from India, Venezuela, Nigeria and other countries. A group of U.S. senators has begun a visit to Brazil to learn more about their ethanol program. They intend to visit Brazil’s sugarcane mills and hold talks with Brazil’s Development and Industry Minister, Luis Furlan, according to the news Agencia Brasil.

Furlan will be heading to Japan soon to discuss exports of ethanol. His ministry announced he will meet with government officials and members of the Japan Bank for International Cooperation and the Itochu Corp.

As energy demand continues to collide with ever-tightening fuel supplies, Venezuela’s president, Hugo Chavez, is strengthening his hold on that country’s oilfields. April 13, Rafael Ramirez, the oil minister, said Venezuela seized two oilfields from France’s Total SA and Italy’s Eni SpA after the two companies did not comply with government demands that their operations be turned over to the state oil company, Petroleos de Venezuela SA (PDVSA).

Ramirez told Al Jazeera and other foreign news agencies: “Those two companies resisted adjusting to our laws. Those fields return to total, absolute control by Petroleos de Venezuela.”

Until the Venezuelan government took over the fields last week, Total and Eni had run them under contract. Other companies, such as ExxonMobil, decided to sell their shares of 32 Venezuelan oil properties instead of complying with the new laws. Asked whether such companies will be forced out of his country, Ramirez said: “We don’t have a veto against any company here. Companies that don’t adjust to our laws, we don’t want them to continue in the country.”

Al Jazeera reported the weekend seizures were the first steps in Chavez’s plan to get more revenue from companies pumping crude oil from Venezuelan oilfields.

The country’s 32 oilfields had been run under contract by private companies. Last year, the government demanded those contracts be changed to provide Venezuela with a 60 percent share in the profits.

Venezuela is taking a tougher stance because of rising oil prices, political instability in the Mideast and Nigeria, and new buyers in Asia. A week ago, light, sweet crude oil for May delivery was 42 cents higher at $67.05 per barrel on the New York Mercantile Exchange. At the start of this week, oil went over $70 per barrel because of rumors the Bush administration was considering the use of nuclear weapons against Iran’s nuclear facilities. The Bush administration said such rumors were “wild speculation,” and diplomatic methods would be employed.

The Chicago Tribune reported U.S. diplomatic efforts in Venezuela were not welcomed in a neighborhood that is a Chavez stronghold. The Tribune said U.S. Ambassador William Brownfield’s convoy was chased and pelted with eggs and tomatoes in Caracas. Chavez condemned the attack; but in a nationally televised address, he threatened to throw Brownfield out of Venezuela if he continued “provoking the Venezuelan people.” The Tribune article also said the U.S. Embassy refused to bow to any pressure to restrict the ambassador’s travel.

From the April 12-18, 2006, issue

Enjoy The Rock River Times? Help spread the word!