Energy Minister Chris Bowen confirmed that an increase in the ethanol level in fuel supplies is under consideration. The shift would expand Australia's current E10 offering, which blends 10 per cent ethanol with standard unleaded petrol, to potentially include E15 and E20 varieties already used in the United States and other nations.
Bowen told reporters in Canberra on Wednesday: "There's suggestions around ethanol, which we're looking at, but I'm not in a position to announce them, or indeed say that they might happen, because you've got to work these things through carefully." He cautioned that any change would require careful consideration through the Fuel Quality Committee before public announcement.
The timing of the review reflects mounting pressure on Australia's fuel supply. According to monitoring website Motormouth, the average price of diesel recently passed $3 in every capital city besides Darwin, while more than 500 petrol stations have run dry of at least one type of fuel. These shortages stem from unprecedented demand following global oil trade constraints resulting from geopolitical conflict in the Middle East.
Higher ethanol blends could ease supply bottlenecks by leveraging domestic production. Australia has three major fuel ethanol production facilities with a total capacity to produce ethanol of around 440 million litres a year. Approximately 68 per cent of this production occurs in New South Wales, at a single production facility in Nowra.
The latest NRMA fuel price report revealed average E10 at 227.6 cents per litre, Premium 95 at 245.5 and Premium 98 at 254.3 cents per litre. The ethanol content provides a cleaner burn and reduces greenhouse gas emissions by up to 6 per cent. However, drivers should be aware of practical considerations. Ethanol is hygroscopic, meaning it absorbs water and causes corrosion, often leading to damage in older engines or cars, and it can loosen any scale or buildup already in the fuel tank.
Virtually every car sold in Australia since 2006 is approved for E10 use. In practice, most drivers see fuel consumption increase by 1 to 3 per cent, with a vehicle averaging 8L/100km on unleaded potentially using 8.1 to 8.2L/100km on E10. This small difference is typically more than offset by E10's lower pump price.
Political pressure to act on fuel supply is mounting from crossbench MPs. Five independent federal members recently outlined domestic fuel security solutions including investing in the structural transition to biofuels by securing domestic supply of renewable ethanol-blended petrol and biodiesel. The government has acknowledged the importance of ethanol and has announced $1.1 billion for its Cleaner Fuels Program to invest in low-carbon liquid fuel production.
The government's caution about announcing changes reflects the complexity of fuel policy. Ethanol mandates have proven controversial in Australia historically. The Productivity Commission recommended in 2017 that state mandates for ethanol blending be axed, saying they affect competitive dynamics and can cost consumers more due to premium fuel substitutions. Any move to higher ethanol blends would need to balance supply benefits against consumer compatibility concerns and broader market impacts. With fuel shortages worsening and prices climbing, the government faces growing incentive to move quickly once its review is complete.