Brasilia - The Brazilian government plans to conduct tests over the next two months on the use of a higher percentage of ethanol in commercial gasoline.
A government source said on Wednesday the test period would be used to determine the viability of increasing the mandatory blend of the biofuel in petrol at the pump, adding that the trial would begin “as soon as possible”.
Brazil is already blending as much as 25 percent ethanol into petrol. The source didn’t say what percentage blends were being tested but the cane industry is seeking a 27.5-percent maximum and lawmakers recently pushed unsuccessfully for a 30 percent blend ceiling.
Raising the blend requirement would favour the Brazilian cane industry, the world's largest, as well as state-run oil company Petroleo Brasileiro, but the measure has faced government resistance in the past due to fears that a greater demand for sugar cane could spur inflation.
The local automotive industry also came out against the increase in the blend saying it would hurt cars’ performance.
Brazil's government decided to increase the amount of biodiesel, mostly made from soy oil, used in diesel to six percent, from the current five, starting in July. A second increase to seven percent is scheduled for November.
Debt-ridden Petrobras would benefit from a higher ethanol blend requirement because it would enable it to reduce the amount of petrol it imports and sells at a loss in the domestic market.
President Dilma Rousseff's government strictly controls fuel prices as a means to control inflation, and her finance minister Guido Mantega is on Petrobras' board.
Despite support for the increased blend from the agriculture, environmental, energy and trade ministries as well as the oil and gas regulator ANP, Mantega has so far opposed any increase in the blend.