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Does the USA have market power in importing ethanol from Brazil?

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Listed:
  • Sunil P. Dhoubhadel
  • Azzeddine M. Azzam
  • Matthew C. Stockton

Abstract

With the ever increasing requirement in the USA to blend higher volumes of advanced biofuels with gasoline and the shortfall in domestic production to fulfil this requirement, imports of ethanol from Brazil will likely take on an even more vital role. In this paper, we examine US buyer power over Brazil. For methodology, we estimate the sugarcane ethanol residual supply function facing the USA. We find that while the USA had buyer power before the enactment of the advanced biofuels mandate, that buyer power disappeared after the mandate. One possible explanation is that, given that Brazil is the primary source of the sugarcane ethanol, the mandate requirement has increased rivalry between the USA and the remaining importers, creating a perfect market overlap between the rivals.

Suggested Citation

  • Sunil P. Dhoubhadel & Azzeddine M. Azzam & Matthew C. Stockton, 2017. "Does the USA have market power in importing ethanol from Brazil?," International Journal of Trade and Global Markets, Inderscience Enterprises Ltd, vol. 10(2/3), pages 251-266.
  • Handle: RePEc:ids:ijtrgm:v:10:y:2017:i:2/3:p:251-266
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    1. Asche, Frank & Nøstbakken, Linda & Tveterås, Sigbjørn, 2009. "When will trade restrictions affect producer behavior: Oligopsony power in international trade," UiS Working Papers in Economics and Finance 2009/20, University of Stavanger.
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