Decentralizing Ethanol Distribution in Southeastern Brazil

Hugo T. Y. Yoshizaki, Antonio R. N. Muscat and Jorge L. Biazzi
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Hugo T. Y. Yoshizaki: Department of Production Engineering, Escola Politécnica, University of São Paulo, C.P. 61548, São Paula, SP, Brazil, 05424-970
Antonio R. N. Muscat: Department of Production Engineering, Escola Politécnica, University of São Paulo, São Paula, SP, Brazil
Jorge L. Biazzi: Department of Business Administration, Faculdade de Economia e Administração, University of São Paulo, São Paula, SP, Brazil

Interfaces, 1996, vol. 26, issue 6, 24-34

Abstract: A renewable energy source, sugar cane ethanol, fuels many Brazilian automobiles. We demonstrated the economic advantage of decentralized distribution directly from the producing mills over the federally mandated practice of centralized, multi-product (ethanol plus fossil fuels) distribution in the producing region of Southeastern Brazil. In the investment analysis, we evaluated logistics costs using a transshipment (LP) model. The quantitative results of our study influenced the client organization, Grupo COSAN/Bom Jesus, to begin lobbying efforts to change federal regulations. The government approved deregulation in July 1993. This changed a Brazilian paradigm; instead of fuel distribution being concentrated in a few big companies, there would be increased competition in the ethanol arena. Currently, Grupo COSAN/Bom Jesus has begun a joint venture with a fossil fuel distributor to invest in this new distribution scheme.

Keywords: industries: petroleum/natural gas/ethanol; cost/benefit: analysis (search for similar items in EconPapers)
Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:inm:orinte:v:26:y:1996:i:6:p:24-34

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