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Brazil to raise ethanol blend in gasoline in May

31 Jan 2013, 5.38 pm GMT

Sao Paulo, 31 January (Argus) — Brazil will boost the ethanol content in its gasoline pool back up to 25pc from 20pc, starting on 1 May, according to Edison Lobao, minister of mines and energy.

The government is confident that local mills will have capacity to meet the increased biofuel demand that will result from the higher blending rate. Brazil lowered the blend to 20pc in October 2011 amidst drought, falling sugar cane yields and high sugar prices, all of which induced mills to favor sugar production over ethanol output.

The government is still considering more incentives to boost domestic investment in ethanol production, Lobao said, without specifying any particular measures.

Brazil sugar and ethanol consultancy Datagro expects the 2013-14 center-south sugarcane crop to rise as much as 10pc over the last harvest. This season gets under way on 1 April.

By increasing the biofuel blend, the government will also be reducing the amount of gasoline that Brazilian state-controlled oil company Petrobras has to import. Since 2011 Petrobras has been forced to import gasoline at international prices while selling it in the Brazilian market at a loss due to government price controls on fuel.

Petrobras announced a 6.6pc increase in gasoline prices on 29 January, but analysts believe the company will still be selling gasoline on the local market at below international prices.

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