SAO PAULO, Oct. 10 (Xinhua) -- According to the latest data from The Brazilian National Petroleum Administration shows that as of October 2, Brazilian gasoline prices remained high for nine consecutive weeks, with the average price remaining above 6 reais per liter (about 5.5 reais per liter), and in some areas even exceeding 7 reais per liter.
Analysts believe that the factors driving Brazil's domestic oil prices upward include higher international crude oil prices and the depreciation of the real. New York crude oil futures and Brent crude oil futures prices continue to rise due to increased global crude oil demand. At the same time, expectations of interest rate hikes and a reduction in asset purchases from the U.S. Federal Reserve have strengthened the dollar, and the real has continued to fall against the dollar.
Estroto converter station photographed in Iberasi, Minas Gerais, Brazil, on December 21, 2017. (Photo by Xinhua reporter Li Ming)
In fact, biomass fuels are widely used in Brazil and rely mainly on hydroelectric power. Brazil's total installed renewable energy generation capacity ranks first in South America, of which hydropower accounts for about 76.8% of Brazil's total installed renewable energy generation capacity。 However, Brazil has suffered rare frosts this year and the worst drought in nearly a century, with massive damage to crops that make biomass fuels, severe water shortages and a power crisis.
In Brazil, gasoline sold at gas stations reportedly contains 27 percent absolute ethanol, and biodiesel accounts for 10 percent of diesel refueling. According to data released by Brazil's Center for Advanced Studies in Applied Economics, the prices of sugarcane currently used to make absolute ethanol are up nearly 60 percent from the beginning of the year, and the price of soybeans used to make biodiesel is up more than 70 percent, as crops have been reduced due to drought and frost in June and July.
This year, many hydropower stations have been unable to generate electricity at full capacity, and Brazil has had to rely on higher-cost, heavier-polluting thermal power plants and import electricity from neighboring countries such as Argentina and Uruguay, resulting in high electricity prices.
In August, Brazil's inflation rate was as high as 9.68%, far exceeding the median inflation target of 3.75% set by Brazil's National Monetary Council for this year.
In response to inflation, Brazil's central bank raised its benchmark interest rate by 1 percentage point to 6.25% on September 22. This is the fifth consecutive rate hike by Brazil's central bank since the start of its rate hike cycle in March this year, and the benchmark rate has risen to its highest level since July 2019. Brazil's central bank expects another 1 percentage point rate hike in the next monetary policy routine.
Marco Rocha, a professor of economics at the University of Campinas state in Brazil, said that the tight energy supply has exacerbated inflationary pressures, but the adjustment of energy supply is not only difficult, but also costly, and Brazil's energy supply situation is difficult to change in the short term.
According to the Brazilian Energy Research Company, hydropower as a share of Brazil's total installed power generation capacity fell from 85% in 2001 to 65.2% in 2021. However, Nadja Heydrich, a professor at the Alvaris-Ponte-Ardo Business School Foundation, believes that the biggest problem with Brazil's power system is still too dependent on hydropower, and it is increasingly necessary to diversify brazil's energy mix.