Chile considers ethanol-gasoline mix as government searches for cheaper fuels amid fiscal pressures

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According to a memo from ministry officials, the energy ministry has developed a proposal to switch to E10 ethanol blend -- blending 10% ethanol into gasoline -- which could reduce government fuel costs by $107 million per year.

OPEC data showed that Chile would import 181,000 barrels of crude oil per day in 2025. The U.S. and Israeli war against Iran has seen oil prices soar. Brent, the benchmark crude oil price, was trading at more than $105 per barrel on Wednesday, up from $73 before the war.

Ethanol and gasoline blends are used widely in Latin America. Brazil's $20 billion ethanol market is second only to that of the U.S. Brazil's fleet of "flex fuel" passenger cars can run on gasoline and a blend of up to 30% ethanol.

Chile does not have a mandate for ethanol blends and is still one of the only countries in the region that uses MTBE as an octane boosting gasoline additive.

According to a U.S. Grains Council report reviewed by?, the government is not adopting ethanol blends yet because Chile does not have a significant domestic production. It also lacks sufficient land for growing enough crops to sustain a domestic industry.

Chile is still exposed to price fluctuations worldwide without the option of ethanol. As the U.S., Israel and other nations intensified their attacks against Iran, the Chilean government stopped cushioning the shock of oil price fluctuations at the pump. Its MEPCO fuel stabilizer mechanism was straining the public finances.

The switch to an ethanol/gasoline mixture would help phase out MTBE, and ease the pressure on President Jose Antonio Kast’s administration after the oil supply disruptions that have stoked discontent amongst the public.

Finance Minister Jorge Quiroz stated in March that "the government is running out of money."

According to the briefing of the Grains Council, switching to E10 for Chile would be relatively easy and affordable. The ministry stated in an internal memo that the state oil company ENAP will need to invest $10.8 million for adapting refinery, terminal, and storage infrastructure. The ministry said that the transition would be gradual and partially offset by a lower carbon tax.

The grains council stated that a shift to a 10% or even 15% blend could be achieved in Chile by 2030.

In May, the Ministry released a roadmap for diversifying fuel sources and reducing carbon emissions, among other things, by 2030.

The Ministry did not respond to any requests for comments?on this memo, including the timing of any switch to ethanol-blend gas and why Chile hadn't pursued it earlier.

According to a briefing by the grains council, 85% of Chile's gasoline is imported from the U.S. The council said that switching to ethanol would benefit corn farmers, as the grain used to produce the fuel is also used to make it.

In its memo, the Ministry acknowledged that such a move would "replace one import dependency by another". Chile imports most of its ethanol from Argentina and Bolivia.

The government's mandate to increase the use of ethanol in gasoline has led to a sharp rise in production in Brazil, a neighboring country.

(source: Reuters)