Brazil to reduce ethanol content in motor fuels

The Wall Street Journal: Market Watch
Sept. 3, 2011, 11:15 a.m. EDT
By Paul Kiernan

SAO PAULO -(MarketWatch)- By reducing the amount of ethanol blended with gasoline, Brazil's Agriculture Ministry said Friday it hopes sugarcane mills will increase output of pure alcohol fuel, prices of which have soared this year and contributed to high inflation.

Gasoline at Brazilian fueling stations currently contains 25% anhydrous ethanol, but that percentage will be cut to 20% starting Oct. 1. Almost half of the cars on Brazil's roads have flex-fuel engines, allowing them to run on gasoline or hydrous ethanol alone.

"The decision made by the government has the objective of reducing consumption of anhydrous ethanol in Brazil," the ministry said in a press release, adding that the move will slash demand for the fuel by about 160 million liters a month. "With that, plants can increase their production of hydrous ethanol, the limited supply of which has left prices above the levels at which it can compete with gasoline in almost the entire country."

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