Is Arbitrage Tying the Price of Ethanol to that of Gasoline? Evidence from the Uptake of Flexible-Fuel Technology
AbstractBrazil is the only sizable economy to date to have developed a homegrown ubiquitously-retailed alternative to fossil fuels in light road transportation: ethanol from sugar cane. Perhaps unsurprisingly, the uptake of flexible-fuel vehicles (FFVs) has been tremendous. Five years after their introduction, FFVs accounted for 90% of new car sales and 30% of the circulating car stock. We provide a stylized model of the sugar/ethanol industry which incorporates substitution by consumers, across ethanol and gasoline at the pump, and substitution by producers, across domestic regional and export markets for ethanol and sugar. We argue that the model stands up well to the empirical co-movement in prices at the pump in a panel of Brazilian states. The paper offers a case study of how agricultural and energy markets link up at the very micro level.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by International Association for Energy Economics in its journal The Energy Journal.
Volume (Year): Volume 32 (2011)
Issue (Month): Number 3 ()
Find related papers by JEL classification:
- F0 - International Economics - - General
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Huse, Cristian, 2014. "Fast and Furious (and Dirty): How Asymmetric Regulation May Hinder Environmental Policy," MPRA Paper 48909, University Library of Munich, Germany.
- Juliano Assuncao & Joao Paulo Pessoa & Leonardo Rezende, 2013. "Flex Cars and Competition in Ethanol and Gasoline Retail Markets," CEP Discussion Papers dp1251, Centre for Economic Performance, LSE.
- Du, Xiaodong & Carriquiry, Miguel A., 2013. "Flex-fuel vehicle adoption and dynamics of ethanol prices: lessons from Brazil," Energy Policy, Elsevier, vol. 59(C), pages 507-512.
- Huse, Cristian & Lucinda, Claudio, 2013. "The Market Impact and the Cost of Environmental Policy: Evidence from the Swedish Green Car Rebate," MPRA Paper 48905, University Library of Munich, Germany.
- Stephen P. Holland & Jonathan E. Hughes & Christopher R. Knittel & Nathan C. Parker, 2011.
"Some Inconvenient Truths About Climate Change Policy: The Distributional Impacts of Transportation Policies,"
1116, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- Stephen P. Holland & Jonathan E. Hughes & Christopher R. Knittel & Nathan C. Parker, 2011. "Some Inconvenient Truths About Climate Change Policy: The Distributional Impacts of Transportation Policies," NBER Working Papers 17386, National Bureau of Economic Research, Inc.
- Demirer, Rıza & Kutan, Ali M. & Shen, Fanglin, 2012. "The effect of ethanol listing on corn prices: Evidence from spot and futures markets," Energy Economics, Elsevier, vol. 34(5), pages 1400-1406.
- Francisco Peñaranda & Augusto Rupérez Micola, 2011. "On the drivers of commodity co-movement: Evidence from biofuels," FMG Discussion Papers dp695, Financial Markets Group.
- Soren T. Anderson, 2010.
"The Demand for Ethanol as a Gasoline Substitute,"
NBER Working Papers
16371, National Bureau of Economic Research, Inc.
- Jose Cantos & Robert Dixon, 2014. "Impacts of bioethanol on gasoline prices in the Philippines: an econometric analysis," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 19(1), pages 1-13, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David Williams).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.