Brazilian-American Chamber of Commerce
I would like to thank the Brazilian-American Chamber of Commerce for the opportunity to address this distinguished audience. When I talk about getting off the dependence of oil on television and radio, I am trying to educate my fellow Americans on a timeframe to release itself from the stranglehold of foreign oil, but also the benefits of alternative energies. I would not have to do this if I were in Brazil. Brazil has already set its course.
Brazil is thirty years ahead of America in getting off the dependence on foreign oil. Not only is Brazil off the dependence on foreign oil but also in the process it has paid off it’s International Monetary Fund (IMF) debt early. Whether Brazil wants to stick with ethanol, go to bio-diesel or introduce electric cars, with electricity produced from bagasse, they are way ahead of America.
According to Lisa Margonelli’s book, “Oil on the Brain,” we buy 1/9 of all the crude oil produced in the world daily importing nearly sixty percent of oil and petroleum products. We consume about 10,000 gallons of oil and oil products a second, which equals almost 21 million barrels a day, or nearly 322 billion gallons per year. 97 percent of the cars Americans drive are gasoline vehicles. Gas/petrol accounts for 140 billion gallons out of the 322 billion gallons of total oil and petroleum products that we consume each year. We import approximately 12 million barrels of oil and oil products a day. Illinois’ Governor Rod Blagojevich’s office translates that to $800,000,000 a day that Americans spend on imported oil and petroleum products.
America is a driving dichotomy. Our gas stations epitomize our conspicuous consumption. We suck up the sweet hydrocarbons as if they were a supersized slushie that we buy inside the convenience store where our wallets are emptied to pay for the gas we have pumped into our supersized SUVs. Or conspicuous consumption flows over with road rage that is five lanes wide, each car fighting for space while going 80 miles per hour in a supersized vehicle with engines burning our fuel at a rate of 10-15 miles per gallon.
Gasoline is the common denominator. We stand at the water cooler lamenting about the price of gas as we discuss where we are going to drive to have some fun on the weekend. It is as though gasoline is the President that none of us voted for, but since it won, we collectively complain about it.
Consumers want it both ways “ they want to be angry and complacent at the same time. They want to blame the auto companies and the oil companies without the perceived inconvenience of conserving. Our political system thrives on the immediate gratification of the American people, and Congress is complicit because for them to get re-elected, they need to satisfy us immediately.
The best our Congress has been able to do is mandate that the auto manufacturers raise miles per gallon on vehicles in a lame effort to get off the dependence on foreign oil. We need only look at the sprawl of suburbia, and one can tell this has not worked. But facts speak just as loudly, since 1973; there has been a 5.3-mile increase per gallon per vehicle. Americans used 146 gallons less in 2005 than in 1973. The reason for the increase is miles driven. Americans now drive 1,985 miles more per vehicle per year than they did in 1973.
Since the Corporate Average Fuel Economy (CAFE) established back in the mid-70s, Americans have nearly doubled their use of foreign oil. In fact, CAFE has allowed people to live further away from where they work because they can travel further on one gallon of gas. How will we ever get off the dependence on foreign oil and continue to drive as much as we want to? Jose Carlos da Silveira Pinheiro Neto, Vice President, General Motors of Brazil, will speak today about flex-fuel vehicles in Brazil. What it took to import them and how flex-fuel vehicles have changed the market. “Brazil now has a competitive market.”
Congress has hinted, not mandated, to the oil companies that they would like oil companies to start putting ethanol pumps in their gas stations. They have even given oil companies an incentive of a $30,000 tax credit to install or convert a pump to E85. On April 2nd Laura Meckler, of the Wall Street Journal wrote an article entitled “Fill up with Ethanol? One obstacle is big oil companies”. Ms. Meckler sites restrictions on gas station owners being required to buy all their fuel from the oil company that franchises them. Oil companies are not allowing consumers to purchase their oil company credit cards. Oil companies are not permitting the advertisement of E85 fuel. And oil companies not allowing the E85 pump installed in their stations.
Sillas Oliva Filho, Manager of Ethanol, Petrobras, will discuss how Petrobras works as an oil company and as an ethanol company and still makes money.
There is a public outcry when oil companies make inordinate amounts of money. We import approximately 1.1 million barrels per day of gasoline and gasoline components. The cost of gas is higher than crude oil because one must refine the oil to get gasoline. Gas would cost $15 to $20 more per barrel compared to crude oil. There is another outcry when oil companies suggest building a refinery, which could reduce the trade deficit by roughly $18,000,000 a day. Our gasoline vehicles can take up to ten percent ethanol. Ten percent ethanol by volume means 14 billion gallons of ethanol per year. To replace 9.3 billion gallons of gasoline per year or 0.61 million barrels of gasoline per day would further reduce our trade deficit by $46,000,000 a day. Some of the same people that denounce gasoline refineries criticize ethanol refineries in their backyard and yet they say they want us to get off the dependence on foreign oil.
We have analysts that tell us how great the economy is doing and how little the unemployment is. Other analysts are telling us how corn ethanol is economically hurting poor people. Other analysts say that corn ethanol is not the most efficient way to make ethanol. Indeed, President Bush himself has said that cellulosic ethanol is the optimum process. Does President Bush realize he is acknowledging that the corn we eat will not be part of the result of ethanol forever? There are about 170 corn ethanol producers that will not be able to produce cellulosic ethanol without serious technological advancement. According to the Deputy Secretary for the Environment of SÃ£o Paulo, Brazil, Suani Teixeira Coelho, sugar cane producers must show technological advancement to have their licenses renewed. Will the United States make these same requirements?
Cosan is one of the world’s largest producers, growers, and processors of sugarcane. Sugar cane is the raw material used to produce sugar, alcohol, ethanol, and electricity from bagasse. Paulo Diniz, Chief Financial Officer, Cosan, S.A., will join us today to talk about Assessing opportunities & planning for future growth
The premise is that the United States is trying to free itself from its dependence on foreign oil, but it is not the only objective. Brazil didn’t stop with just getting off the dependence on foreign oil; they have created competition between oil and ethanol. They have done it by diversifying their engines and their energy.
There is the elephant in the room, and the question is how Brazil can become part of America’s solution? Many of our farmers were barely making ends meet five years ago. Some farmers sold their property to developers because they could no longer afford to be farmers. The farmers that are left are creating energy that oil companies don’t own. They are creating competition in a market that has had virtually no competition for years.
People agree that we need more available ethanol. The United States is close to the production of cellulosic ethanol. A California company is funding research and development to produce ethanol from the garbage. Brazil is a friendly nation to the United States, and more trade between the two countries should star. Certainly, if we can find a way to trade with politically troubled Venezuela, we should be able to find a way to trade with Brazil. But the question remains, how do we take the tariff off Brazilian ethanol and still keep competition between ethanol and oil alive at the gas station? Brazil diversified its energies to include its farmers. How will Brazilian importers import their ethanol to the United States and be part of the solution, part of the competition?
These are issues that need a solution to proceed.
Thank you very much.