As deliveries to service stations improved yesterday, there
was a growing rumble from motorists misinterpreting the Zera price table and
jumping to the wrong conclusion that ethanol contributes around three quarters
of the petrol price.
In fact ethanol blending does not increase the price of
petrol, as has been misinterpreted, and actually knocks about 49c off the price
of a litre of blend.
Confusion has been reigning because the energy regulator,
Zera, included a price of $54.5763 for ethanol in its pricing table. However
this is the cost of a litre, delivered for blending when only 200ml is mixed
with every 800ml of pure petrol.
The price of petrol ready for blending is now $56.7563 a
litre. This is the landed cost plus the taxes and the storage and handling
charges at Msasa. So ethanol is still very slightly cheaper than petrol. A
litre of blend will combine 800ml of petrol with 200ml of ethanol for the
present E20 product which is 20 percent ethanol.
The 800ml of petrol at this blending stage costs $45.405
while the 200ml of ethanol costs just under $10.915. Adding the two together
you get $56.32, which is a saving of 43c on the litre of petrol.
From the bulk storage there are additional charges, a few
small ones mainly involving the tanker costs and the larger percentage mark-ups
allowed to oil companies and service stations. With the slightly cheaper
petrol-ethanol blend these percentage mark-ups are in turn slightly lower,
knocking off around 6c in total, giving the 49c a litre saving of blend over
petrol.
However, the authorities are concerned over the ethanol
prices charged by the two producers in the Lowveld and are seeking more detail
over the ethanol production costs, Zera’s acting chief executive officer, Mr
Eddington Mazambani, told the Portfolio Committee on Energy and Power
Development yesterday. Zimbabwe uses anhydrous ethanol, which requires a
further process after distillation to remove all water.
The gap, in percentage terms, between pure petrol and the
petrol-ethanol blend used to be greater. Part of the narrowing is explainable
by the drop in the landed cost of petrol, following the crash in crude oil
prices since the lockdowns and travel restrictions in most countries with the
Covid-19 pandemic.
Petrol is now landed at 48.15 USc a litre, a little over
10USc a litre less than at the beginning of the year. Crude costs are a small
fraction of the landed costs, the rest being the refining and transport costs,
which are generally independent of crude costs.
But the position has now been reached when a very small
drop in landed costs could make petrol cheaper than ethanol.
Those concerned about the rise in price in fuels sold in US
dollars, a price that should not vary with the new Zimbabwe dollar exchange
rate, will find the answer in statutory instruments gazetted yesterday by
Finance and Economic Development Minister Professor Mthuli Ncube. He pushed up
the excise duties on petrol to 30 USc a litre and on diesel and paraffin
products to 25 USc a litre.
He also applied the exchange rate changes to his excise
duties on Zimbabwe dollar-denominated fuels, taking the petrol duty from
Z$8.37c a litre to Z$17.207 a litre and that for diesel and paraffin from
Z$7.566 a litre to Z$14.34 a litre. The excise duties, and the small taxes that
add to the tax collected, are worked out in percentage terms in Zimbabwe
dollars but are in fixed terms for US dollar fuel.
The Government sets the taxes on US dollar fuel imported
with free funds and sold in US dollars at a far higher level than it does for
Zimbabwe dollar fuel. Ethanol producers charge US$1,05 a litre for ethanol, it
has been reported. Thus a US dollar-denominated litre of blend will have 21USc
of ethanol in a litre, along with close on 70USc for the 800ml of petrol in
that litre. The percentage mark-ups magnify the tax changes.
There has been the same confusion between the price of a
litre of ethanol in the Zera pricing table and the actual 200ml used in the
litre of blend, along with the 800ml of petrol.
Mr Mazambani told the Parliamentary committee that the US
dollar ethanol price had been the same since mandatory blending was introduced,
but there were continual and significant variations in the Zimbabwe dollar
price charged, hence the desire for more information on the costs and pricing
formulas of ethanol.
He stressed again that the major driver of fuel prices was
the actual delivered cost of the fuel and Zimbabwe has little say in that
regard due to the small size of its economy.
Mr Mazambani said Zera had no authority to reverse the
blending policy as it was set by Government in the National Energy Policy of
2012 and National Renewable Energy Policy of 2020. He noted that the two
companies involved in ethanol production were employing thousands of people
directly and indirectly, and supporting local communities.
Mr Mazambani also told the committee that the
liberalisation of the official foreign exchange market will result in a weekly
adjustment of fuel prices soon after the new ruling rates were announced late
in the day every Tuesday.
The latest fuel price increases were a result of the
movement of the US$ rate from the fixed US$1:$25 to the US$1:$57 that was the
average rate obtained at the end of the first forex auction.
Turning to Zera’s capacity to monitor fuel supply in the
country, Mr Mazambani said the present shortages had stretched their resources,
but indicated that five service stations in Harare were being investigated
after they were found selling fuel allocated through Government facilities in
foreign currency. Fuel bought in local currency by an oil company and service
station must be sold in local currency. Only fuel imported by the oil company
with free funds can be sold in foreign currency.
“Under a normal environment, the way we are structured is
sufficient for us to regulate the sector but in the environment that we are in
now, where there is an acute shortage, there is a lot of illegalities and
arbitrage happening in the sector. And it’s happening in the night when we do
not have shift workers, so there we might be found wanting.
“We are actually working with other agencies and arms of
Government to augment our numbers to deal with issues happening at outlets. We
are also developing regulations to hold operators accountable such that when we
hear these reports somebody can actually lose their licences,” he said.
A Bill to amend the Petroleum Act is being crafted to
empower Zera to deal with errant fuel companies and service stations.
Fuel queues have reduced significantly as deliveries build
up with heavy traffic yesterday along Mutare Road driving west in Harare after
collecting fuel from the Msasa depot. Motorists are also being more careful
with purchases after the price rises, and are no longer desperate to hoard or
drain tanks to sell fuel on the black market.
Engen Simon Muzenda Street had shorter queues than seen in
recent days after a delivery. Mr Tendai Vhurundiya, a motorist who had just
refuelled, reflected the new order when he said the days of full tanks could be
over for many.
“I used to fill up my tank with about $750, today I used
around $3 500 to get 55 litres. We may be going back to days where we would buy
two or three litres at the pump,” he said.
Puma stations in Samora Machel Avenue and in Kwame Nkrumah
Avenue had no fuel but were expecting deliveries. But the queues of waiting
motorists were shorter than seen recently with an attendant noting that the new
prices had probably dampened demand.
“We don’t have fuel at the moment. In normal times the
queue would have been long with people waiting for a delivery but today as you
can see, the cars are few,” they said.
Total in Samora Machel and Fifth Street had very few cars
getting fuel.
There are, however, some stations selling exclusively in
United States dollars. Some of these are legal, having gone through the
required process and using fuel directly imported with free funds but others
have been discovered to be selling fuel they bought in Zimbabwe dollars for
foreign currency, which is a criminal offence. The majority of those charging
exclusively in US dollars are small service stations. Herald
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