Key facts
- Chile is considering adopting a 10% ethanol-gasoline blend (E10).
- The shift could save the government an estimated $107 million annually.
- The proposal aims to reduce reliance on MTBE and mitigate oil price volatility.
- Chile imports 85% of its gasoline supply from the U.S.
- State oil company ENAP would need to invest about $10.8 million to adapt infrastructure.
Chile is exploring the adoption of a 10% ethanol-gasoline blend (E10) as a measure to combat rising fuel costs and fiscal pressures, according to documents seen by Reuters. The energy ministry has drafted a proposal that could reduce the government's annual fuel supply costs by approximately $107 million.
This consideration comes as Chile, a significant oil importer, faces economic strain from soaring oil prices, particularly in the wake of the U.S.-Israeli war on Iran. Brent crude oil traded above $105 a barrel on Wednesday, a substantial increase from its pre-war level of around $73 a barrel. The country currently uses MTBE as a gasoline additive and lacks substantial domestic ethanol production capabilities, making it vulnerable to global price fluctuations.
While ethanol-gasoline blends are common in Latin America, with Brazil boasting a large ethanol industry, Chile has historically shied away due to insufficient domestic production capacity. However, the current economic climate and strained public finances, as highlighted by Finance Minister Jorge Quiroz's statement in March that "The government is out of money," are prompting a re-evaluation.
The proposed switch to E10 is seen as relatively simple and affordable, with state oil company ENAP requiring an estimated $10.8 million investment to adapt refining and storage infrastructure. The transition could also be partially offset by lower carbon tax payments. The U.S. Grains Council noted that Chile imports 85% of its gasoline from the U.S., and a shift to ethanol could benefit U.S. corn growers, though the ministry acknowledged in a memo that it "replaces one import dependency with another," as current ethanol imports primarily come from Argentina and Bolivia.