Diesel will rise R$0.35 with new biodiesel blend, says IBP

The increase in the mixture of biodiesel in diesel from 12% to 14%, announced this Tuesday by the federal government, should increase the price of a liter of fuel at the pumps by at least R$0.35 from March onwards, when the measure comes into force.

The calculation is from the Brazilian Oil and Gas Institute (IBP), an organization that represents oil companies, distributors, equipment suppliers and other companies in the sector.

“Right now, the price of biodiesel is 18% above the price of diesel. As the logistics of distributing biodiesel are more complicated, and there may be a price increase due to the increase in compulsory demand, we can expect a greater increase (than R$0.35). Which will coincide with the increase in PIS/Cofins in January and ICMS in March”, explained the Institute.

The mixture of biodiesel and diesel today is 12%. Originally, the schedule predicted an increase to 13% in 2024, 14% in 2025 and 15% in 2026.

The calendar, however, was brought forward on Tuesday (19) at a meeting of the National Energy Policy Council (CNPE) as announced by the Minister of Mines and Energy, Alexandre Silveira. The meeting was attended by President Luiz Inácio Lula da Silva (PT).

Now, with the change, the 14% will come into effect in March of next year. And the 15% mix was brought forward to 2025.

Victory for agriculture and concern for distributors and transporters

The increase in blending is a victory for agribusiness, especially for producers of biodiesel and its raw materials, such as soybeans. The fuel is a bet on the energy transition in the transport sector, as it is produced from renewable sources, such as vegetable oils and animal fats.

The estimate for biofuel is that national production will increase from the current 6.3 billion liters annually to more than 10 billion by 2026.

On the other hand, sectors such as distributors and industry express concern about the way in which the increase in mixing is being implemented.

These changes were viewed with concern by the IBP, especially due to the lack of predictability of impacts and clarity of the rules.

“Agents’ operational planning goes through several stages, such as negotiations with biodiesel suppliers, regulatory obligations, contracting biodiesel collection logistics and adapting the operation at distribution bases. Thus, any change in mandatory mixing levels requires advance notice between decision and its execution, under penalty of generating a race for product and logistics, with increased prices and potential risk to supply”, states the Institute.

The National Transport Confederation (CNT) states that not only the production capacity of the input in Brazil should be considered, but the consequences of this increase on the functioning of vehicles and the economic, environmental and safety impacts on the entire transport chain and country logistics.

According to the CNT, a study showed that an increase in the percentage of biodiesel from 7% increases CO emissions._two and reduces engine power, which consequently generates more diesel consumption and impacts the need for greater imports of this fuel, compromising national energy security.