Is Arbitrage Tying the Price of Ethanol to that of Gasoline? Evidence from the Uptake of Flexible-Fuel Technology
Alberto Salvo and
Cristian Huse ()
The Energy Journal, 2011, vol. Volume 32, issue Number 3, 119-148
Brazil 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.
JEL-codes: F0 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (28) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to IAEE members and subscribers. bers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:aen:journl:32-3-a05
Ordering information: This journal article can be ordered from
Access Statistics for this article
More articles in The Energy Journal from International Association for Energy Economics Contact information at EDIRC.
Bibliographic data for series maintained by David Williams ().