BRAZIL: Government plans to keep ethanol blend at 20%
Published: 01/27/2012, 8:48:38 AM
Brazil's government will keep the amount of ethanol mixed with gasoline at reduced levels despite complaints about low prices for the biofuel, according to Dow Jones.
The government does not plan to raise the volume of ethanol mixed with gasoline at service-station pumps from the current 20% when the sugarcane harvest starts in April, said Ricardo de Gusmao Dornelles, director of the renewable fuels department at the Mines and Energy Ministry in an interview with Valor Economico newspaper.
Brazil slashed the percentage of ethanol mixed with gasoline to 20% from 25% on Oct. 1 because of skyrocketing prices amid a shortage of the fuel last year.
"The government is aware that sugarcane production will be greater [this year], but consumption will also grow," Dornelles said. "This will still be a relatively tight year."
Two consecutive years of poor sugarcane harvests reduced Brazil's ethanol output, causing the price of the alternative biofuel to skyrocket between harvests and become less competitive as a fossil-fuel substitute. Ethanol is an especially important fuel in Brazil, where nearly all new light vehicles sold in the country are flex-fuel vehicles that can run on ethanol, gasoline or any combination of the two fuels.
The lower-percentage ethanol mix and new government rules aimed at increasing stocks of the biofuel have caused an oversupply in the market that has undermined ethanol prices in recent weeks. The government will meet with ethanol producers next week, Dornelles said.
"The government is going to observe how the market behaves under these new rules and will make constant evaluations," Dornelles said.