Local fuel costly despite blending

via Local fuel costly despite blending – The Zimbabwe Independent August 7, 2015 by Wongai Zhangazha

ZIMBABWE’S fuel prices remain very high compared to other countries in the Southern African region despite government’s unilateral decision in August 2013 to enforce mandatory blending of petroleum products, claiming it would bring down prices and reduce the country’s import bill.

The country is currently selling petrol mixed with 15% ethanol content (E15).

The E15 blend, which should be cheaper than unleaded fuel, is going for between US$1,40 and US$1,53 per litre at service stations in Zimbabwe, which is far more expensive than several countries in the region using unleaded fuel.

Since the introduction of fuel blending, Zimbabwean motorists have not enjoyed a significant price reduction while the economy at large has also not benefitted from fuel price reduction. When fuel blending was introduced two years ago, unleaded fuel was selling for about US$1,50 per litre which is the current costs of blended fuel at some service stations.

Government however claims it has made significant savings on its import bill because of fuel blending. Last month the Ministry of Energy said government was saving US$40 million a year in fuel imports since the introduction of blended petrol.

Average petrol prices released by the World Bank for 2014 show that the pump price of petrol in Zimbabwe at US$1,56 per litre was expensive compared to other countries in the region.

Zimbabwe requires 45 million litres of petrol every month, meaning there is a huge benefit for Green Fuel, the only plant in Zimbabwe that produces ethanol.

The country’s neighbours Botswana, South Africa, Namibia, Tanzania and Swaziland all had cheaper petrol costing US$1,06, US$1,19, US$1,08, US$1,29 and US$1,14 per litre respectively.

In Zambia, a landlocked country like Zimbabwe, unleaded fuel is currently selling for US$1,10 per litre, while in Tanzania the commodity is selling for US$1,05 per litre. The average pump price for unleaded fuel is in South Africa is US$1,09 per litre while in Namibia petrol costs about US$1 per litre.

The only significant fuel price reduction came in January this year when government ordered a reduction of the petrol price from US$1,52 to US$1,32 per litre in line with the falling global prices, only to raise customs duty on fuel the following week by US$0,10 per litre forcing prices to shoot up again.

The Zimbabwe Energy Regulatory Authority (Zera) announced mandatory blending of fuel ethanol at the level of 5% ethanol and 95% unleaded petrol on August 15, 2013.

This followed the issuing of an ethanol production (mandatory blending) licence to Green Fuel, owned by businessman Billy Rautenbach on August 5 of that year.

The decision to introduce mandatory blending was criticised by most Zimbabweans who argued they should be given a choice to use fuel of their choice.

Former energy minister Elton Mangoma, who refused to grant Green Fuel a license during his time in the unity government cabinet (2009-2013), told the Zimbabwe Independent then that it was a scandal that the government would come up with a policy which would result in “an individual” benefitting at the expense of the nation.

“The issue here is that blending is a public policy issue that people should discuss openly. We should not make public policy to benefit individuals, and Green Fuel is a private individual not a public institution,” said Mangoma.
Green Fuel is owned by local tycoon Billy Rautenbach.

Zera introduced fuel blending despite protests from motorists, individuals as well as car manufacturers and assemblers who complained blended fuel damaged car engines and would also result in a reduction of vehicles performance.

Consumer Council of Zimbabwe (CCZ) director Rosemary Siyachitema said this week although the organisation had not done any opinion polls on the country’s fuel pricing, it was “in constant touch with Zera discussing the pricing of petrol”.

She however said her organisation was unaware of pricing models for blended fuel.

“We are generally in constant communication with the Zera with the objective to properly understand issues with local fuel pricing and international markets on how they price fuel,” Siyachitema said.

“Based on the model they showed us, it seems our local prices respond to the increase and decrease of fuel prices internationally. However, we are not so sure when it comes to the blended fuel. What we do tell people, just like with supermarket goods, is to also shop around for fuel. You find some service stations selling at US$1,35 per litre while others are a bit higher.”