Informal Ethanol Market Thrives in Mexico

by Sergio Meana (Argus Media) Drivers in Mexico are using high concentrations of ethanol in their tanks as a direct, cheaper substitute of gasoline despite blends over 10pc being illegal, conventional fuel retailers said.

Retailers in often informal street-side outlets advertise ethanol on e-commerce platforms such as Facebook Marketplace. They claim it makes gasoline perform 30pc better, cleans injectors, reduces pollution and is cheaper than gasoline.

Mexico's biggest retail association Onexpo said the practice concerns the country's 12,500 conventional fuel outlets.

"They are selling it in a pretty irresponsible way," Onexpo president Roberto Diaz de Leon told Argus. "Some are clandestine shops where the put the product in taxi cabs directly from plastic jars and some are more formal retail fuel shops where they sell gasoline and ethanol."

Retail costs for ethanol range from Ps13/l-Ps16/l ($2.5/USG-$3/USG), or up to 40pc cheaper than Ps21/l for regular gasoline. Ethanol is also less expensive than MTBE, Mexico's main oxygenate.

One formal seller, Fuel Flex, holds a license from the energy regulatory commission (CRE), has a formal website and offers different franchise options to resell ethanol. Its website cautions that its E85 blend of 85pc ethanol can only be used in flex-fuel vehicles, while fuel-injection vehicles can use E50 and vehicles with a carburetor should only use E20.

In Mexico there is a tightly regulated process for blending gasoline with ethanol or with MTBE. Blending must be done in refineries, authorized storage centers or in authorized tank trucks before distribution, Diaz de Leon told Argus.

Mexico is the main buyer of MTBE from the US, where supply has been tight because of plant outages and other issues. Mexico imported 2,000 b/d of ethanol from the US in September, compared with 23,000 b/d of MTBE, according to the US Energy Information Agency.

Mexico only in late 2018 approved a 10pc mix of ethanol for gasoline, and it is still prohibited in the largest cities of Mexico City, Guadalajara and Monterrey.

Associations such as the US Grains Council have lobbied Mexico to allow the use of E10 in all of the country.

Mexico has had a few pilot projects to produce ethanol, mostly from sugar cane rather than corn because of supply concerns over one of its main agricultural products. But production is negligible. READ MORE