Out of Gas -- Brazil Replaces Oil With Homegrown Alternative

SAO PAULO, Brazil, May 8, 2006 — -- Amid the samba-pulsed chaos that is Sao Paulo, Brazil, a revolution in fuel efficiency has emerged in the world's fifth largest city.

When Brazilians say fill it up, they're not getting the oily mix Americans see at the pump, which is 90 percent gasoline and 10 percent ethanol.

They get pure ethanol, as Brazil now produces 5 billion gallons of the sugar-cane distilled fuel annually. That's enough to power three-quarters of the nearly 2 million cars South America's largest country makes every year.

The production advantages are obvious -- with sugar cane the energy source is above ground and can be produced for $30 dollars a barrel.

Today a barrel of oil is priced at more than double that.

At the Brazilian pump, ethanol is nearly half the cost of gasoline. It also burns cleaner and is the leading reason this country is now entirely energy independent, no longer buying any oil on the foreign market.

"The empire of oil is coming to an end," said Roberto Rodriguez, Brazil's agricultural minister. "Wherever you go in the world, people are looking for replacing oil."

Pays to Make the Switch

The switch away from oil has been 30 years in the making, as the Brazilian government started its ethanol program during its first fuel crisis.

The changeover took federal encouragement, because the car companies, oil companies and the Brazilian people all needed a nudge.

Gas dealers were forced to offer ethanol at their pumps, and car buyers who purchased flex cars that are built with the technology to run on ethanol, gasoline or a mix of both received tax incentives.

Today ethanol outsells gasoline, and three out of every four new cars sold is a flex car.

Once drivers start driving these vehicles, the economics take over.

It would cost $529 in gas to make a cross-country trip from California to New York in a Chevy pickup. To make the same trip in the same vehicle powered by ethanol would cost $218.

And some Brazilians even say their cars have more power when ethanol is pumped into the tank.

"My car has 111 horses with ethanol and 100 horses with gasoline," said Fernao Ciampa.

But ultimately price is the bottom line, even for an eco-friendly driver like Ciampa.

"At the end of the day, if the prices are not good, you are not going to be saving the world," he said.

Could ethanol replace large amounts of gasoline in the United States? The stations selling it in Brazil carry familiar brand names, but American oil companies would have to be convinced it makes sense to invest in distributing it. As for the new car technology, the leading producers of flex cars are Ford and GM.