Mike Stevens | Jan 3, 2012

A ban on unleaded petrol in New South Wales could lead to increased fuel prices as a result of strained supply, BP has warned this week.

The ban, intended to force motorists to use ethanol-blended fuel, will go into force in July. It was passed under the former Labor State Government in 2007.

BP spokesperson Jamie Jardine said that while the oil giant believes biofuels will play a significant part in the future of transportation, "we don't believe that imposing a mandate is the way to do it".

"We think ultimately it is bad for consumers, it is going to reduce choice and potentially push up prices," Mr Jardine said.

"We just don't think that imposing a mandate is the right way to do it. The way to do it is through market-based mechanisms."

The New South Wales government has confirmed that marinas will be exempt from the ban, and premium unleaded petrol - which is needed by many high-performance cars and vehicles made before 1986 - will continue to be available.

In the event that ethanol supplies fall short, legislation also allows the government to give suppliers exemptions so that they can offer regular petrol.

The Australian Competition and Consumer Commission has also warned of the potential for a significant impact on consumers who can't use ethanol-blended fuel, leaving the more expensive premium unleaded fuel as the only alternative.

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