Is Sugar Sweeter at the Pump? The Macroeconomic Impact of Brazil's Alternative Energy Program
The recent world energy crisis raises serious questions about the extent to which the United States should increase domestic oil production and develop alternative sources of energy. We examine the energy developments in Brazil as an important experiment. Brazil has reduced its share of imported oil more than any other major economy in the world in the last 30 years, from 70 percent in the 1970s to only 10 percent today. Brazil has largely achieved this goal by: (1) increasing domestic oil production and (2) developing one of the world's largest and most competitive sources of renewable energy -- sugarcane ethanol -- that now accounts for 50 percent of Brazil's total gasoline consumption. A counterfactual analysis of economic growth in Brazil from 1980-2008 suggests that GDP is almost 35 percent higher today because of increased domestic oil production and the development of sugarcane ethanol. We also find a notable reduction in business-cycle volatility as a result of Brazil's progression to a more diversified energy program. Nearly three-fourths of the welfare benefits have come from domestic oil drilling, however, as rents have been paid to domestic factors of production during a time of rising oil prices. We discuss the potential implications of Brazil's energy program for the U.S. economy by conducting historical counterfactual exercises on U.S. real GDP growth since the 1970s.
|Date of creation:||Oct 2008|
|Date of revision:|
|Note:||DAE EFG ME|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kilian, Lutz, 2005.
"Exogenous Oil Supply Shocks: How Big Are They and How Much do they Matter for the US Economy?,"
CEPR Discussion Papers
5131, C.E.P.R. Discussion Papers.
- Lutz Kilian, 2008. "Exogenous Oil Supply Shocks: How Big Are They and How Much Do They Matter for the U.S. Economy?," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 216-240, May.
- Raymond, Jennie E & Rich, Robert W, 1997. "Oil and the Macroeconomy: A Markov State-Switching Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(2), pages 193-213, May.
- James D. Hamilton, 2000.
"What is an Oil Shock?,"
NBER Working Papers
7755, National Bureau of Economic Research, Inc.
- Hooker, Mark A., 1996. "This is what happened to the oil price-macroeconomy relationship: Reply," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 221-222, October.
- Hamilton, James D, 1983. "Oil and the Macroeconomy since World War II," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 228-48, April.
- Hooker, Mark A, 2002. "Are Oil Shocks Inflationary? Asymmetric and Nonlinear Specifications versus Changes in Regime," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 540-61, May.
- James D. Hamilton, 1985. "Historical Causes of Postwar Oil Shocks and Recessions," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 97-116.
- Hamilton, James D., 1996. "This is what happened to the oil price-macroeconomy relationship," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 215-220, October.
- Lutz Kilian, 2008. "A Comparison of the Effects of Exogenous Oil Supply Shocks on Output and Inflation in the G7 Countries," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 78-121, 03.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:14362. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.