By Kylie Madry
Sept 17 (Reuters) - Chile, one of Latin America's largest oil importers, has started to consider adopting ethanol-blended gasoline as spiking oil prices this year have strained the economy and government finances, according to documents seen by Reuters.
The energy ministry has drafted a proposal to shift to E10 ethanol blending — mixing 10% ethanol with gasoline — that could reduce government fuel supply costs by approximately $107 million annually, according to a memo prepared by ministry officials.
Data from the Organization of the Petroleum Exporting Countries, or OPEC, showed that Chile imported 181,000 barrels per day of crude oil in 2025. Oil prices have soared during the U.S.-Israeli war on Iran. Brent, the global benchmark for crude oil, traded at over $105 a barrel on Wednesday, up from about $73 a barrel before the war began.
Ethanol-gasoline blends are widely used across Latin America. In Brazil, the $20 billion ethanol industry is second only to the U.S. Brazil has long been known for its fleet of "flex-fuel" passenger cars that can run on a blend of ethanol, now topping 30%, mixed into gasoline.
Chile has no ethanol-blending mandate, and is one of the few countries in the region still relying on MTBE, an octane-boosting gasoline additive.
The government has held off on adopting ethanol blends because Chile lacks significant domestic production, lacking sufficient land to grow enough crops to support a domestic ethanol industry, according to a U.S. Grains Council briefing reviewed by Reuters.
Yet without the ethanol option, Chile remains exposed to global price swings. In March, as U.S. and Israeli attacks on Iran ramped up, the government of the mining-dependent nation stopped fully cushioning the shock at the pump due to oil price volatility, with its MEPCO fuel stabilization mechanism straining public finances.
Switching to an ethanol-gasoline blend would help phase out MTBE and ease pressure on President Jose Antonio Kast's administration following the oil supply disruptions, which have stoked public discontent.
"The government is out of money," Finance Minister Jorge Quiroz said in March.
According to the grains council briefing, the switch to E10 would be relatively simple and affordable for Chile. State oil company ENAP would need to invest about $10.8 million to adapt refining, terminal and storage infrastructure, the ministry said in its internal memo. It said the transition could be introduced gradually and partly offset by lower carbon-tax payments.
A shift to a 10% blend, and even a 15% blend, could be achieved by 2030 in Chile, the grains council said.
In May, the ministry released a roadmap to diversify fuel sources and lower carbon emissions by 2030, including through fuel blends.
The ministry did not respond to requests for comment on the memo, including on the timing of any transition to ethanol-blend gasoline and why Chile had not pursued it sooner.
Chile already depends on the U.S. for 85% of its gasoline supply, according to the grains council briefing. A switch to ethanol could benefit corn growers, the council said, since the grain is used to make the fuel.
Such a move "replaces one import dependency with another," the ministry conceded in its memo. Chile's ethanol imports currently come mostly from Argentina, followed by Bolivia.
Production in neighboring Brazil has risen sharply under the government mandate to use more ethanol in gasoline.
(Reporting by Kylie Madry; Editing by Lucinda Elliott and David Gregorio)
