O2Diesel Corporation Hails Passage of "VEETC" Legislation

NEWARK, DE Oct 25, 2004: O2Diesel Corporation expressed great satisfaction following President Bush's signing into law the so-called "JOBS Bill" which included the "Volumetric Ethanol Excise Tax Credit" (VEETC). The VEETC is extremely important to the Company as it more than doubles the number of potential customers that can benefit from the existing US$0.52 per gallon federal incentive to use fuel ethanol, regardless of application or volume in diesel, whether the fuel is taxed or not. As part of this amendment, the US$0.52 per gallon ethanol incentive is extended through December 31, 2010.

Since its adoption as part of federal energy legislation in the late 1990s, the current slate of incentives for use of fuel ethanol was only practical for gasoline applications. VEETC simplifies the law by making all uses of ethanol eligible for the incentive, fully opening up the 55 billion gallon per year and growing U.S diesel fuel market to the Company's proprietary product, O2Diesel(TM). This legislation could significantly accelerate use of this clean-burning diesel fuel in every industry using diesel fuel -- mining, railroads, agriculture, and government agencies.

"This is a substantial enhancement to O2Diesel's(TM) economics and opens up," says O2Diesel Corporation's CEO Alan Rae, "especially for municipal bus and off-road equipment applications that previously could not benefit from the existing incentive. O2Diesel(TM) is now an even more competitive alternative to standard diesel fuel, while delivering cost-effective reductions of oxides of nitrogen (NOx), particulate matter (PM) and up to a 70% smoke emissions associated with diesel fuel. This VEETC legislation is a win-win for all parties involved. The citizens living in smog-ridden cities will benefit from cleaner air, and companies who wish to do something immediately to clean up their diesel emissions can do so without incurring significant additional costs."

O2Diesel(TM) can be made available in any fuel market utilizing the existing diesel fuel storage, supply and distribution network. The Company's patented technology produces a stable ethanol-diesel blended fuel which, when used in standard diesel engines, results in a more complete combustion and fewer toxic pollutants emitted from the exhaust pipe.

With oil prices hitting record highs, the fact that O2Diesel(TM) also displaces approximately 9% of diesel fuel normally used with U.S.-produced renewable components (ethanol and its proprietary technology) means 9% less diesel that needs to be refined from a barrel of oil. Considering estimated U.S. annual commercial consumption of diesel fuel exceeds 55 billion gallons, and consumption growing at a faster pace than gasoline, switching to O2Diesel(TM) just makes sense, according to the Company.

About O2Diesel: The Company and Its Fuel Technology

O2Diesel Corporation and its U.S. subsidiary, O2Diesel, Inc., is a pioneer in the commercial development of a cleaner-burning diesel fuel alternative that provides exceptional performance and environmental qualities for centrally fueled fleets and off-road equipment of all kinds. Engineered and designed for universal application, O2Diesel(TM) is an ethanol-diesel blend that substantially reduces harmful emissions without sacrificing power and performance. Extensive laboratory and in-use field tests have demonstrated the effectiveness of O2Diesel(TM) -- the introduction of this cost-effective, cleaner-burning diesel fuel is now underway in the United States and other global markets. For more information, please consult: www.o2diesel.com.