The Philippines’ fuel ethanol consumption is projected to grow by as much as five percent this year, as the steady growth of car sales and the government’s large-scale infrastructure projects drive high demand beyond conventional fuel sources, according to the United States Department of Agriculture (USDA).

In its “Biofuels Annual” report, the USDA’s Foreign Agricultural Service (FAS) estimated that ethanol consumption will reach 840 million liters this year, up from 797 million liters in 2024.

The higher demand was attributed to the increase in fuel pool size and the steady uptake of voluntary E20, or the 20 percent ethanol blended with gasoline.

While E20 gasoline blending contributed minimally to fuel ethanol consumption in the first half of the year, the USDA-FAS estimates a larger contribution in the second half as more fuel retailers begin offering E20 at gas stations.

“The prevailing uncertainty on vehicle compatibility results in slow uptake of E20 gasoline,

which fuel retailers hope to address to increase sales,” the report read.

Last year, the Department of Energy (DOE) allowed oil companies to offer E20 as a voluntary option, lifting the ethanol blend in gasoline beyond the long-standing 10 percent (E10) level that had been in place since 2012.

With a fuel market dominated by gasoline and diesel, higher consumption of fuel ethanol will likely be propelled by an increase in car sales.

The international agency specifically cited the target of the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) to reach 500,000 car sales this year as a “main growth driver.”

The industry group’s sales target is a 7-percent increase from the record-high 467,252 units sold in 2024.

Based on CAMPI’s latest report, sales in the first five months of the year have reached 190,429 units or 38 percent of the target.

The USDA-FAS said the government’s policy support for electric vehicles (EVs) will not have an immediate impact on biofuel consumption.

On the contrary, it posits that the country’s large-scale investments in transportation infrastructure will have an impact on the demand for fuel ethanol, once they become fully operational.

In particular, it cited key railway projects such as the Metro Rail Transit Line 7 (MRT-7), Metro Manila Subway Project, and the Cavite extension project of Light Rail Transit Line 1 (LRT-1).

The projected rise in consumption this year will be supported by an increase in fuel ethanol imports, which will rise 10 percent from 409 million liters last year to 450 million liters.

The report noted that imports will cover around 54 percent of the needed supply to meet mandated E10 and voluntary E20 blends.

The US is expected to remain the largest supplier of ethanol to the Philippines, although it is facing increased competition from Brazil.

Meanwhile, the USDA-FAS estimates that the local production of fuel will inch up by two percent to 390 million liters from 382 million liters in 2024.

However, an insufficient supply of sugarcane and molasses feedstocks will remain a challenge for the industry this year. Both feedstocks are used for producing ethanol, with approximately 80 percent primarily using molasses.

Based on the report, there is currently “no immediate solution” to the insufficient supply, noting that production of molasses depends on the volume of harvested and milled sugarcane.

“Over the past decade, sugarcane production has shown a fluctuating trend due to shrinking plantation areas, adverse weather conditions, and the high cost of inputs,” it read.

The local industry is currently exploring other sources such as corn, sweet sorghum, cassava, nipa, and sweet potato as potential feedstocks.

“But these remain in the research stage and will take time to develop into viable commercial alternatives to sugarcane for bioethanol production, if they succeed at all,” USDA-FAS said.