John Myers, Business Reporter

The price of fuel at the pumps has been rising continuously over the past several months, but that is set to change later this year with the partial introduction of E10 fuel.

The ethanol-blended fuel becomes available at limited locations in October, and will go islandwide by the first quarter of 2009.

Replacing MTBE with ethanol is expected to save the government an estimated $2.3 billion annually, but how much it will save motorists is still to be calculated, said Energy Minister Clive Mullings.

"But you will see a decrease," he said.

"We have not signed off yet to see that actual pricing formula, but what obtains internationally is that blended gasolene with ethanol is in fact cheaper than gasolene with MTBE," he told Sunday Business.

Price difference

Mullings said the difference in the price between gasolene containing MTBE and that with 10 per cent ethanol could be near 50 per cent, given that in the United States, gasolene is now selling above US$4.00 per gallon, while ethanol blend is available at the pumps for just above US$2 per gallon.

Project officer for the E10 programme, Dwight Lewis, said the pricing formula for gasolene mixed with 10 per cent ethanol would most likely be completed nearer to the October roll-out date since the prices of oil and ethanol change constantly.

Parliament has to approve legislation for E10 ahead of the roll-out.

An estimated 70,000 litres of ethanol would be required annually to replace the 10 per cent MTBE in gasolene.

The government has signed a five-year take-off agreement with Infinity, through its local management company NewCo, to provide all the ethanol required to facilitate the E10 fuel mix.

To produce this 70,000 litres from local sugar cane would require an additional 30,000 acres of canelands to be put into production.

Import ethanol

Initially, Infinity is expected to import ethanol from Brazil to service the contract, but will eventually use locally produced ethanol as it builds out its operations here.

The price at which Government buys the ethanol from Infinity will be fixed at 65 per cent below the ex-refinery price of gasolene.

Environmental coordinator at Petrojam, Nicole Smith, said there would be no problems for most motorists switching to E10 when it becomes available, as the fuel has been tested and approved for vehicle models as early as the mid-1980s.

She said motorists could switch interchangeably between E10 and gasolene at anytime without problems, an important consideration since only the eastern half of the island would have access to E10 initially.

john.myers@gleanerjm.com