US inventors claim to have perfected a device that allows people to make their own ethanol fuel for as little at 50p a gallon.

Floyd Butterfield has started a company with venture capitalists to market the $10,000 E-Fuel 100 MicroFueler.

The machine converts sugar and some household waste into ethanol. Butterfield estimates that it is possible to provide fuel at a dollar a gallon.

"It is going to cause havoc in the market and cause great financial stress in the oil industry," Silicon Valley entrepreneur Thomas Quinn, the man behind the Wii motion sensor and a backer of the scheme, told the International Herald Tribune.

The machine uses sugar, water and electricity in concert with a specially developed yeast formula to make the fuel.

Quinn said that other fuels can be used, and that he collects waste alcohol from local bars to make his own fuel.

Butterfield claimed that he has cracked several key problems with ethanol production, including designing special filters to accelerate the process. The byproduct of the process is drinkable water.

Daniel Kammen, director of the Renewable and Appropriate Energy Laboratory at UC Berkeley, said: "There are a lot of hurdles you have to overcome, and it is entirely possible that they have done it, but scepticism is a virtue."

Butterfield's company plans to launch in the UK, the US and China by the end of the year.