SecProbe.io

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Mail Stop 3561

								            August 11,
2005

Mr. Alan R. Rae
Chief Executive Officer
O2Diesel Corporation
100 Commerce Drive
Suite 301
Newark, Delaware 19713

		RE:	O2Diesel Corporation
			Form 10-KSB for Fiscal Year Ended December 31, 2004
			Filed March 31, 2005
Form 10-QSB for Fiscal Quarter Ended March 31, 2005
			File No. 1-32228

Dear Mr. Rae:

	We have reviewed your filings and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and do not intend to expand our review to
other
portions of your documents.  Where indicated, we think you should
revise your disclosures in response to these comments.  If you
disagree, we will consider your explanation as to why our comment
is
inapplicable or a revision is unnecessary.  Please be as detailed
as
necessary in your explanation. In some of our comments, we may ask
you to provide us with information so we may better understand
your
disclosure.  After reviewing this information, we may raise
additional comments.

	Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your
filings.
We look forward to working with you in these respects.  We welcome
any questions you may have about our comments or on any other
aspect
of our review.  Feel free to call us at the telephone numbers
listed
at the end of this letter.

Form 10-KSB for Fiscal Year Ended December 31, 2004

Cover Page

1. You filed a Form 8A-12B on June 23, 2004 at which time your
file
number changed.  Please revise the Commission file number to 001-
32228.

Item 8A.  Controls and Procedures

2. Please revise your disclosures in your Form 10-KSB and
subsequent
Form 10-QSB to identify any changes in your internal controls over
financial reporting that have materially affected, or are
reasonably
likely to materially affect, your internal controls over financial
reporting.  Your current reference to "no material changes" is not
sufficient in this regard.  See Item 308(c) of Regulation S-B for
guidance.

Notes to Financial Statements

Note 2.  Summary of Significant Accounting Policies, page F-7

Revenue Recognition, page F-10

3. You charged off approximately $26,000 of sales during 2004 to
support tests of fuel by your customers.  In light of the
significance of the charge off to your annual sales and the
apparent
contingencies associated with the sale of your product, tell us
how
you support your initial revenue recognition for these
transactions.
Please explain your accounting with reference to SAB 104.  We may
have further comments.

4. Your disclosures state that revenue is recognized upon the
passage
of title of the product to the customer, but you do not state when
title transfer occurs or who assumes risk of loss during shipment.
Please explain to us how your accounting policy complies with the
delivery and performance requirements of Topic 13:A of SAB 104.
If
your shipping terms determine risk of loss and/or title transfer,
you
should disclose such terms in your future filings.  Please also
tell
us when title transfers to the customer and who assumes risk of
loss
if the product is damaged during shipment to the customer.  Please
also revise your disclosures to clarify how your policy complies
with
GAAP if/when revenue is recognized prior to delivery of the
product
to the customer.

5. Based on your discussion in MD&A of the CityHome program it
appears that you recognize revenue net of the incremental costs of
O2Diesel and administration costs.  We assume that you act as a
broker of advertising space in these transactions and therefore
are
not the primary obligor in the arrangement.  If our assumptions
are
incorrect, please tell us your basis in GAAP for recognizing
sponsorship fees on a net basis.  Recording revenues on a net
basis
in accordance with EITF 99-19 contemplates recording the amount
billed to the customer less the amount paid to a supplier.  Please
explain how the netting of both incremental costs of O2Diesel and
administration costs against sponsorship fees is supported by
GAAP.
Also, tell us what consideration you have given to presenting net
revenues from sponsorship arrangements and product revenues
separately.  Please refer to paragraph 19 of EITF 99-19.  Please
revise your disclosure to discuss your policies for recognizing
revenues from CityHome transactions.

6. Your policy disclosure indicates that you may sell your product
through exclusive sales agents for which you are paid a share of
the
gross profit realized on sales to the end customer.  Please
clarify
for us whether revenue is recognized gross or net in these
situations
and why.  Revise your disclosure accordingly.

Note 6.  Accrued Liabilities, page F-14

7. Please tell us the nature of the items included in Investor
Relations. Revise your note disclosure here and in future filings
to
describe the specific nature of material line items when not
otherwise obvious to the reader.

Note 9.  Stockholders` Equity

Issuances of Preferred Stock:, page F-16

8. Please tell us how you accounted for the Series A and B
Convertible Preferred Stock upon issuance.  Please also include a
discussion of any consideration given to EITF 98-5.  In this
regard
we note that the conversion terms contemplate the issuance of a
number of common shares whose intrinsic value at each issuance
date
exceeds the proceeds received for each offering.

Exhibit 31 - Certifications

9. Please amend your Form 10-KSB for the year ended December 31,
2004
to revise your certifications to read exactly as set forth in Item
601(b)(31) of Regulation S-B.

	As appropriate, please amend your filings and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response.  Please furnish a response letter with your
amendment that keys your responses to our comments and provides
any
requested information.  Detailed cover letters greatly facilitate
our
review.  Please file your response letter as a correspondence file
on
EDGAR.  Please understand that we may have additional comments
after
reviewing your amendment and responses to our comments.

	We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings to be certain that the
filings include all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision.  Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.

	In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:

* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;

* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and

* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.

	In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filings or
in
response to our comments on your filings.

	You may contact Staff Accountant Ta Tanisha Henderson at
(202)
551-3322 or me at (202) 551-3843 if you have questions regarding
comments on the financial statements and related matters.

		Sincerely,

		George F. Ohsiek, Jr.
	Branch Chief
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Mr. Alan R. Rae
O2Diesel Corporation
August 11, 2005
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