Brazil encouraging flex-fuel vehicles

Published: Tuesday 15 April 2008

-- As crude oil prices soar to new highs, Brazil's state-owned petroleum company Petrobras is looking beyond the windfall to place bets in the growing alternative energy market.

The company does not plan to raise petrol and diesel prices, frozen since 2005, even as world oil prices have surpassed US $110 per barrel. Instead, Petrobras authorities say they would stop buying petrol and switch to ethanol. The government is now encouraging flex-fuel vehicles, which can use any mixture of ethanol and petrol, or each of the fuel alone. Flex-fuel vehicles account for 20 per cent of Brazil's car fleet. The company, however, plans to adjust the prices of other oil products such as naphtha and aviation fuel in line with global rates. Petrobras authorities believe oil prices of US $110 a barrel has a speculative element. They believe that a possible recession in the USeconomy is likely to cause a drop in oil prices, and say they cannot adjust key fuel prices during market turbulence.

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