Brazil Ministry Calls for Return of Ethanol Fuel Blend to 25%

Brazil’s Ministry of Mines and Energy wants the percentage of ethanol in vehicle fuel sold in the country to be increased to 25 percent from 20 percent as sugar- cane production rises.

The government must approve the new mix, which may take effect at the start of the next sugar-cane harvest, Ricardo de Gusmao Dornelles, director of the renewable fuels department at the ministry, said today at a conference in Rio de Janeiro.

Energy Minister Edison Lobao said Aug. 17 that the country was considering raising the amount of ethanol in fuel. Brazil cut the ethanol blend to 20 percent from 25 percent last October after prices of the renewable fuel rose following a poor cane harvest.

State-controlled oil company Petroleo Brasileiro SA (PETR4) made up for the shortfall by importing more gasoline, Salim Morsy, an analyst at Bloomberg New Energy Finance’s Sao Paulo office, said today in a telephone interview.

“Next year, there should be ample feedstock, so we won’t see the same price volatility we saw in 2011,” Morsy said. Petrobras, as the company is known, “has been clamoring for a rise in the blend.”

Companies replanted about 15 percent of their cane in the 2011-12 crop year, which starts in April in the Center South region, compared with half that the previous season.

“Assuming the weather is good, next season’s crop will be substantially better than this year’s,” Morsy said.

The measure may push the price of anhydrous ethanol, which is blended with gasoline in Brazil, up by 7 cents a liter, Morsy said. Anhydrous ethanol sold at an average 1.14 reais (56 cents) a liter for the week ended Oct. 5.

The renewable fuel rose to a record high of 2.47 reais ($1.21) for the week ended April 15, 2011, from 1.24 reais from the week ended Jan. 7, according to information compiled by Bloomberg.

To contact the reporters on this story: Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net; Stephan Nielsen in Sao Paulo at snielsen8@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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