Brazil’s dual-fuel ethanol fleet stabilizes gasoline prices despite Iran
war oil shock
[March 31, 2026] By
MAURICIO SAVARESE
SAO PAULO (AP) — As the war in Iran rattles global oil markets, Brazil
is partially shielded by a decades-old buffer against shocks that is
both cheap and environmentally friendly: Tens of millions of drivers
here can choose between filling their tank with 100% sugarcane-based
ethanol or a gasoline blend that contains 30% of biofuel.
Brazil’s massive dual-fuel fleet — consisting of vehicles capable of
running on any combination of ethanol and gasoline — is unique in its
scale. The program, launched in 1975 during the country's military
dictatorship, has successfully evolved in democratic times to reduce
dependency on foreign oil.
Today, as the latest conflict involving Iran, the United States and
Israel enters its fifth week, nations like India and Mexico are looking
at the Brazilian model as a blueprint for energy security.
While consumers worldwide face steep price hikes, Brazilian gasoline
prices rose just 5% in March — compared to 30% in the United States.
Analysts partially credit the stability to a mature domestic biofuels
industry that allows the country to withstand geopolitical shocks with
minimal risk of fuel shortages.
“Brazil is much better prepared than most countries because it has a
viable alternative of this nature,” said Evandro Gussi, president of the
Brazilian Sugarcane Industry Association, UNICA.
The timing is particularly fortunate as Brazil’s next sugarcane harvest,
beginning in the first half of April, is expected to produce a record 30
billion liters of ethanol — 4 billion more than last year. “That
increase alone is equivalent to the total amount of gasoline Brazil
imported in all of last year,” Gussi noted.
Despite being a major producer and exporter of crude oil, Brazil still
relies on imports to meet its domestic demand for refined fuels. The
country currently sources petroleum from the U.S., Saudi Arabia, Russia
and neighboring Guyana.
However, ethanol has become the backbone of the daily commute. In 2025,
ethanol accounted for 37.1 billion liters of sales, according to
state-run Energy Research Company. Though it slightly trails diesel and
gasoline in total energy share, its presence at every gas station
provides Brazilians with a psychological and economic safety net.
Investment in research
The success of Brazil's biofuels economy is rooted in the state of Sao
Paulo, the country's industrial and agricultural powerhouse.
Production here is a mix of high-tech, export-oriented “mega-farms” and
smaller family operations like farm Bom Retiro, founded in 1958, whose
few dozen workers are now preparing to crop their 40-square-kilometer
land (almost 10,000 acres).
Brazil's technology in biofuels is also fostered by years of
state-sponsored research. One of them lies outside Sao Paulo, the
Science Development Center for Ethanol at the Unicamp university in
Campinas. Coordinator Luis Cortez says Brazil's program holds unique
advantages unmatched by other nations.
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Cars fuel up with ethanol at a gas station in Sao Paulo, Friday,
March 27, 2026. (AP Photo/Andre Penner)
 “We have flexibility in ethanol
production, in vehicle engines and from the federal government,
which sets the percentage of ethanol in the fuel blend," said
Cortez. “We have flexibility at three levels.”
Ultimately, he argues, that investment in research ends up making a
difference at gas stations.
The diesel problem
According to the Brazilian Association of Fuel Importers, gasoline
refined by the state-run Petrobras — which includes a biofuel blend
— is currently 46% cheaper than imported fuel, or 1.16 Brazilian
reals ($0.22) less per liter. Similarly, Petrobras diesel is priced
at refineries at 63% below import levels.
While the closing of the Strait of Hormuz has not yet caused
dramatic shifts in Brazil’s gasoline market, the country is
struggling with rising diesel prices. This is because diesel is
primarily made of imported crude oil and has a smaller percentage of
biofuels.
Unlike the sugarcane-ethanol success story, Brazil’s biodiesel,
which is mostly made from soybeans, only makes up 14% of the diesel
blend. That figure might rise to the same 30% used in gasoline
blends only by 2030, if research and technological developments
allow, which means the conflict has brought immediate impact.
Brazil's diesel prices surged by more than 20% in March, prompting
President Luiz Inácio Lula da Silva to propose import subsidies
through May. Government estimates show that the country has to buy
between 20% and 30% of its diesel every month, most of it coming
from Russia.
Brazil's authorities say the country imported almost 17 billion
liters of diesel last year.
For the 80-year-old leader Lula seeking reelection this October,
stabilizing diesel prices is critical to prevent truck driver
strikes and keep food inflation in check.
Gussi, the president of UNICA, said that since the latest Iran war
several heads of state have approached him to discuss Brazil’s
biofuels industry. Among them is Mexican President Claudia Sheinbaum,
who said earlier this month she is interested in Petrobras’
technology in producing ethanol from agave, a very popular plant in
her country.
“The best news, even in the midst of a situation like the one we are
experiencing, is that this solution has a significant level of
replicability,” Gussi said.
___
AP journalist Thiago Mostazo contributed to this report from
Campinas.
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