ZIMBABWE’S fuel is the most expensive in the region following this week’s price hike, amid grave concern over the cost component of locally-produced ethanol on the overall petrol price. Ethanol is supplied exclusively by business tycoon Billy Rautenbach’s Green Fuel.
On Tuesday, Zimbabwe Energy Regulatory Authority (Zera) announced a dual pricing model, which saw the price of diesel shooting up from ZW$24,90 to ZW$62,77, while the US dollar price was pegged at US $1,09 per litre.
Petrol price per litre increased from ZW$28,90 to ZW$71,62 or US$1,28 per litre, driven by the expensive ethanol.
Zera has set the stage for fuel dealers to ditch selling in the inflation ravaged Zimbabwean dollar preferring hard currency.
The fuel price hike is expected to cause further price increases of basic commodities at a time incomes and pensions have been decimated by inflation, which has galloped to nearly 800%.
Questions have been raised as to why ethanol, which is produced in Chisumbanje by Green Fuel, which is enjoying a monopoly, has added a huge cost on the petrol price.
According to the cost build-up provided by Zera, the total landing cost for petrol per litre is US$0,48, including the free on-board cost of US$0,37, financing cost of US$0,02 and pipeline costs of US$0,07.
Total levies and taxies comprised of duty, Zinara levy, debt redemption amounts to US$0,48. Administrative costs made up of storage fees and clearance agency fees US$0,02. Distribution costs, a mere US$0,05.
It is, however, the ethanol cost of US$1, 10 per litre that has raised eyebrows, with market watchers saying it was cheaper to use unblended petrol than to use expensive E20 petrol. E20 contains 20% ethanol and 80% petrol. Motorists have raised concern over the E20 fuel, which is not as efficient as unleaded fuel. Zimbabwe’s fuel prices are at odds with those obtaining in the region.
A fuel price analysis conducted by the Zimbabwe Independent this week shows that in Malawi the unblended petrol price is K690,50 (US$0,93), whereas diesel costs K664,80 (US$0,90). In Mozambique, the diesel price is pegged at MZN58,96 (US$0,84), with unblended petrol trading at MZN64,22 (US$0,91) per litre.
According to a June 1 fuel update, in South Africa, petrol cost R13,40 per litre (US$0,77) and diesel was R11,30 (US$0,64) per litre. In Swaziland, diesel trades at R12,20 (US$0,70) per litre, while unblended petrol costs R11,90 (US$0,68) per litre. Namibia sells unblended petrol at R11 (US$0,60) per litre and R12 (US$0,69) for diesel.
The hike also comes at a time international oil fuel prices are dropping due to the effects of the Covid-19 pandemic.
Government has, however, in stark contrast to global trends, increased fuel in United States dollar terms, resulting in Zimbabwe having the most expensive but less effective fuel in the region.Economist Victor Bhoroma pointed out that blending was no longer serving its purpose of reducing costs.
“To be honest there is no reason to blend if the pump price ends up higher than in unblended. The reason for blending is to reduce the cost of fuel and manage production costs but here there is something amiss considering that ethanol is exclusively supplied by Green Fuel,” Bhoroma said.
“Unfortunately, there could be political considerations behind the Zera policy. It’s not easy to assess or speculate before they explain it.”
Authorities are swimming against the tide as global oil prices tumbled from a high of US$63 per barrel last December to US$39,04 per barrel (WTI crude) and brent crude (US$ 41,77 per barrel).
The latest price regime is contrary to Zera’s position in August last year, which said blending was reducing the cost of fuel.“Without blending the pump price of unleaded petrol would be significantly higher than it is now,” Zera said then.
A player in the fuel industry said: “Ethanol is in demand internationally due to the demand for sanitisers as a result of the Covid-19 pandemic and its price has shot up. Why don’t we just export ethanol at those high prices, then sell unleaded petrol locally, which obviously would be cheaper than the E20 and a better quality product.”