ENERGY-U.S./LATIN AMERICA:
An OPEC for Ethanol?
Humberto Márquez

CARACAS,  (IPS) - U.S. President George W. Bush will visit Latin America next week seeking a strategic alliance with Brazil to develop biofuels -- and Venezuela, the region's main oil exporter, is taking this as a warning sign.

Bush will visit Brazil, Uruguay, Colombia, Guatemala and Mexico between Mar. 8 and Mar. 14, and his talks with Brazilian President Luiz Inácio Lula da Silva will be "an enormous opportunity" to create new incentives for the production and sale of ethanol, or fuel alcohol, as a substitute for petrol, according to Gregory Manuel, special adviser and international energy coordinator for the U.S. State Department.

The Brazilian daily O Estado de Sao Paulo, based in the city of Sao Paulo where the meeting will be held, said that the presidents would promote "a kind of OPEC for ethanol, with an inter-American market to guarantee a stable supply of biofuels, with diversified production throughout the region."

Brazil is the world's top producer of ethanol, which it makes from sugarcane. It has also developed biodiesel production from oil-bearing plant crops, to mix with or substitute for fossil fuels in diesel engines.

"An OPEC for ethanol is impossible, because alcohol will never be able to substitute for oil," Venezuelan expert Alfredo Michelena told IPS. "However, it could replace a small percentage of U.S. fuel consumption, equivalent to the oil supplies it receives from Venezuela," he added.

OPEC, the Organisation of the Petroleum Exporting Countries, is made up of Algeria, Angola, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Sauda Arabia, United Arab Emirates and Venezuela. These countries produce about 40 percent of world crude oil consumption of 84 million barrels per day (bpd), and supply two-thirds of the crude that is traded on international markets.

The United States consumes one-quarter of global production of crude and half the world's petrol. Its main foreign suppliers are Canada, Mexico, Saudi Arabia and Venezuela, which exports nearly 1.4 million bpd to the United States, equivalent to about six percent of total U.S. consumption.

U.S. demand for oil is increasing in line with its economic growth, which was 3.3 percent of gross domestic product (GDP) in 2006, according to the Department of Commerce. "So Washington, as well as weighing the risks associated with the political situation in the Middle East, clearly intends to lessen its oil dependence on Venezuela," said Michelena.

The political and diplomatic confrontation between Washington and Caracas has been going on for three years, and the Southern Command -- one of the seven worldwide divisions of the U.S. armed forces, and which includes Latin America and the Caribbean -- considers Venezuela to be a "threat to hemispheric security" because of its "radical populism."

Nevertheless, the flow of oil has continued without interruption.

Venezuela's national income depends to a great extent on its exports of 2.5 million bpd, and so it is on the lookout for other markets, such as China, India, and Latin American and Caribbean countries with no oil of their own.

The United States could replace oil from Venezuela by using more biofuels, as well as oil from its own state of Alaska, according to Michelena, one reason it wants to woo Brazil, "which doesn't have an oil pact with Caracas, although both countries are members of the Southern Common Market (Mercosur)," he pointed out.

In his opinion, the U.S. "is selling the idea that Latin American countries could join in producing biofuels to supply the North, in exchange for investment and technology to boost agriculture and lift millions of people out of poverty."

The surge in biofuels is a response to oil's big problems: its high price, its role in global warming, and the fact that it is a non-renewable resource.

"What the United States is attempting is impossible," Venezuelan President Hugo Chávez said on one of his radio and television programmes. "To use ethanol to maintain their lifestyle, with 70 people out of 100 owning cars, would mean planting maize on an area of five or six times the Earth's surface," he said.

In the United States, ethanol is extracted from maize, while in Brazil and Colombia, and to a lesser extent Cuba and Venezuela, it is produced from sugarcane. U.S. production capacity is about 300,000 bpd, but only 600 of its 200,000 petrol stations dispense E85 fuel, which is 85 percent ethanol.

Brazil is both the world's largest producer of ethanol (600,000 barrels a day) and its largest consumer. Over 80 percent of the country's vehicles can run on gasoline, alcohol or a mixture of both. Plainly, Brazil is interested in broadening its markets, which may lead to a new understanding between Lula and Bush.

Chávez and Lula are firm political allies, and their governments are promoting the construction of a gas pipeline across Brazil, from gas deposits on the Caribbean to markets on the River Plate. The Venezuelan president tried to shoot down the idea of a Washington-Brasilia pact on ethanol.

Chávez appealed to ethical reasons, like world hunger. "To produce one million barrels of ethanol requires growing 20 million hectares of maize. Is this right, when there are 800 million hungry people on this planet? How many people could that grain feed?" he asked.

"To fill the 25-gallon (95-litre) petrol tank of a vehicle just once would take as much grain as would feed a person for a year," said Chávez. This is an argument that environmentalist organisations have used before him.

Chávez also cited studies reporting that agriculture already uses up 70 percent of the world's fresh water, and said that "expanding crop cultivation will lay claim to more water resources, which people need, let alone the impact of more agrochemicals on the soil and the trend towards monoculture to supply ethanol production plants."

Lester Brown, head of the U.S. environmental organisation Earth Policy Institute, has pointed out that cars, not people, are responsible for the increased U.S. demand for cereal grains, while the poorest two billion people on the planet face the threat of rising grain prices.

Chávez said in his speech, "We have seen people in Mexico protesting against higher prices for (maize) tortillas. Why? Because the United States has been installing biofuel factories and buying up Mexican maize, and that is one cause of the price increases."

Meanwhile, Venezuela is defiant about its oil trade with the United States. "If they don't want it, they needn't buy it," said Foreign Minister Nicolás Maduro, in response to the frequent warnings about reducing U.S. dependence on Venezuelan oil from the State Department and U.S. Congress.

Fuel ethanol fever is catching on worldwide, from small-scale production in countries like Nicaragua and Panama, to mega-projects like Japan's, which plans to produce at least 100,000 bpd of this renewable energy source within two decades.

Even Venezuela, which imports Brazilian ethanol to add to gasoline (because it is less polluting than methyl tert-butyl ether, or MTBE, used to increase octane ratings) plans to grow 276,000 hectares of sugarcane to produce some 25,000 bpd of fuel alcohol.