Forty years ago, the Organization of the Petroleum Exporting Countries placed an embargo on petroleum, bringing an oil-addled world to its knees.
As oil prices quadrupled, the world panicked. In the immediate aftermath, gas stations closed on Sundays. Small, fuel-efficient cars became popular. The U.S. government initiated the first programs into developing solar power and electric vehicles.
And Brazil -- a developing country under military dictatorship at the time -- began the push for what has become the most successful biofuel industry in the world.
Brazil relied on imported oil in the 1970s, and about 80 percent of the petroleum consumed was imported, said Alfred Szwarc, an emissions and technology consultant for the Brazilian ethanol trade group UNICA. In response to the embargo, the government pushed for a number of research and development programs. The most successful was the National Alcohol Program, or "Proalcool."
"The program was based on the concept that ethanol made from sugar cane could in a first step substitute gasoline partially in the form of gasoline-ethanol blends and in a second step substitute gasoline totally, becoming the fuel of choice," Szwarc said. The program made an effort to phase out fossil-fuel vehicles by subsidizing ethanol production and encouraging carmakers to build ethanol-ready vehicles.
The government also mandated a 10 percent ethanol gasoline blend in the fuel supply. By 1977, gasoline-ethanol blends had arrived at the pump. The first flex-fuel cars were on the road two years later. Brazil's military government concentrated the power with an iron fist. Petrobras, the state-owned oil company, was key in developing a nationwide distribution system of pumps.
The sugar cane industry invested in new fields. New ethanol mills dotted the landscape. The World Bank and national financial institutions structured a financing system to support the investment.
The public's initial reaction was mixed, said Barbara Bramble, board chairwoman of the Roundtable on Sustainable Biofuels, who has worked on biofuel issues in Brazil since the 1980s.
"They didn't have very good quality control of the fuel," she said. "A lot of people would start to buy it and their cars wouldn't work very well, so it got a horrible rap."
Low oil prices, democracy threaten ethanol
The oil embargo of 1973 pushed Brazil to consider a two-pronged strategy for fuel: to produce and use enough ethanol to reduce the necessity to use oil, and work more intensely to identify petroleum sources in Brazil, said Carlos Henrique de Brito Cruz, scientific director of the São Paulo Research Foundation, an independent body to promote scientific and technology research.
Small, family-owned businesses were making ethanol for the first ethanol-only cars. By 1980, the Proalcool program was well-established in the country. A decade later, the dictatorship had transitioned into democracy. By this time, the price of oil had also dropped, and the newly democratic government undertook a heavy burden in ethanol subsidies.
"However, the government could not shut it down in one step because so many people had ethanol cars," Brito said. "They had believed in the government saying, 'Buy an ethanol car, we will make ethanol available,' and so on; there was a lot of tension between fiscal pressure and the number of cars in the street."
Brazil's economy was in bad shape. The government decided to drop the subsidies, and ethanol car owners were left without a fuel source.
"In those years, there was a lot of loss in the credibility of the ethanol program," Brito said.
But the country continued to support technology investments in ethanol vehicles, despite the United States' and the World Bank's disagreement that such payments were unwise, Bramble said.