Decentralizing Ethanol Distribution in Southeastern Brazil

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 p...

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Bibliographic Details
Published in:Interfaces (Providence) 1996-11, Vol.26 (6), p.24-34
Main Authors: Yoshizaki, Hugo T. Y, Muscat, Antonio R. N, Biazzi, Jorge L
Format: Article
Language:English
Subjects:
Alternative energy sources
Brazil
Competitive advantage
Cost allocation
Cost benefit analysis
Decentralization
Deregulation
Diesel fuels
Distribution
Economic costs
Energy resources
Ethanol
Ethanol fuels
Fuels
Gas stations
industries: petroleum/natural gas/ethanol
Logistics
Management techniques
Minimization of cost
Natural resources
Operations research
Petroleum industry
Retail stores
Special Section: The Role of OR/MS in Managing Natural Resources and the Environment
Sugar cane
Transshipment
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Summary: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.
ISSN:0092-2102
2644-0865
1526-551X
2644-0873
DOI:10.1287/inte.26.6.24