Zim expects no fuel price reduction

HARARE - The reintroduction of a 15 percent ethanol mandatory blending will not lead to a decrease in petrol prices, analysts and fuel retailers say.

This comes after Energy minister Samuel Undenge last week announced that government had increased the mandatory blending ratio of unleaded petrol from 10 to 15 percent, with immediate effect following improvement in supplies of ethanol from Green Fuel, the country’s sole ethanol producer.

“The way I see it, this move will not lead to a decrease in pump prices because there is the monopoly issue with the ethanol producer. Green Fuel does not have competition so really, this will not translate to a change in the price,” said Issis Mwale, a Harare-based economist.

Chenjerai Kudumba, who owns several service stations around the country, also echoed Mwale’s sentiments, saying the change, if any was, going to be “inconsequential”

“There will be no price decrease; this is very simple logic really, when global oil prices slumped early this year, the price decrease was not significant. In my opinion, the change in blending ratios will not translate to a price decrease,” he said.

Although Zimbabwe introduced mandatory blending in 2013, fuel prices in the country have remained higher compared to regional countries as a result of high government taxes.

Presently, E10 blending pump price ranges from $1,46 to $1,53 per litre depending with the service station and retailer — compared to a regional price of $1,30 per litre.

Economist John Robertson said the change in the recent blending ratios would result in a “very minute change in prices”.

“Naturally, with all things being equal, this move should affect fuel price because it is now cheaper to produce a litre. But, I just don’t see how government intends to implement this decision because as we all know, the sole ethanol producer is not producing enough,” said Robertson.

The economist also said government had to implement measures to police fuel retailers, adding that at the moment “consumers were at the mercy of retailers”.

“As far as I know, motorists just have to have faith that the retailer is giving them the correct ratios, there is no mechanism to comfort motorists that they are being served with the correct blending ratios, so government has to act on this” he said.

The E15 blending means the petrol is blended with 15 percent ethanol. Mandatory blending was introduced in 2013 starting at E5 which comprises five percent ethanol and 95 percent petrol.

The blending ratio doubled to 10 percent before being increased to 15.

It was, however, later cut back to five percent last year after Green Fuel, failed to meet the demands of the market.

Green Fuel is a joint venture between Arda and Macdom and Ratings Investment owned by businessman, Billy Rautenbach.

 

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