As it became clear that supplies of ethanol on the domestic market would fall far short of demand, the government dropped from a mandated blend of 25 % down to 20 % on 1 October 2011. The country's cane crop has suffered from bad weather and lack of investment ever since the 2008 financial crisis weakened many of the companies operating in the sector. However, demand from Brazil's growing flex fuel fleet of cars continues to rise rapidly with increased disposable income of the new middle class.
Raising the blend rate of ethanol in gasoline would take Brazil's state-run oil company Petrobras off the hook for importing some of the gasoline it is forced to secure abroad and sell at a discount on the local market. The company has been running a loss in its refining and distribution division because of the price cap on gasoline since at least 2006, writes Argus Media.
Petrobras submitted a study to the government and requested it raise the blend rate based on its evidence that there is sufficient anhydrous ethanol on the local market to meet the demands of a 25 % blend during this current season.
Lobao said the government is currently weighing the fundamentals of the local biofuel market, and added that if cane output improves – as it is expected to do later in the year due to heavy rainfall in the growing regions in April through June – the government could raise the blend at any given moment.
Source: ArgusMedia.com
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