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Blessing Bonga Business Reporter
THE recent introduction of E5 mandatory blending has been described by some economic analysts as a positive step towards a subsequent reduction in the price of blended fuels including E85 that was introduced early this year and now selling at US$1,10 per litre compared to an average of US$1,50 per litre for unleaded petrol while fuel dealers feel the price is justified at US$1,10 per litre.
Economic analyst, Mr Witness Chinyama said the introduction of E5 mandatory blending would guarantee ethanol producers especially the recently licensed Green Fuel (Pvt) Ltd a ready market and this is likely to trigger the demand for sugar cane to meet the country’s ethanol requirements.
“Now that mandatory blending has been introduced, ethanol producers have a guaranteed market and therefore sugar cane farmers would have to up their production to meet the ethanol producers’ demand. Once this happens, then prices can be stable or even go down which should eventually translate to the fuel consumer as well,” he said.
Mr Chinyama added that the current scenario in the fuel sector can be likened to the 2009 period when the multi-currency regime was adopted which saw exorbitant prices being charged for commodities on the market while inflation ballooned but eventually prices stabilised because capacity utilisation improved as time went on.
“I think as mandatory blending has just been introduced, with time ethanol producers would improve on their current capacity utilisation which will see prices of blended fuels stabilising or even coming down below the prevailing average of US$1,10 per litre, the same scenario witnessed in terms of pricing during the period Government introduced the multi-currency regime,” he added.
However, Comoil managing director, Mr Lovemore Mazero, feels the US$1,10 per litre pricing is fair taking into consideration that there are also costs that come in the production chain regardless of the fact that 85 percent of the final product is produced locally.
“I think the difference of about US40 cents between blended fuel and unleaded petrol is reasonable since there are also production costs involved in ethanol production that are passed on to retailers by the producers.
“The remaining 15 percent that is imported comes with duties that are involved in the process, so I think we should not expect a very big different in terms of pricing between the ethanol blends and unleaded petrol,” he said.
Mr Mazero added that consumers should be educated on the ethanol blends so that they get to understand and appreciate the benefits associated with the use of the fuel as most people may only be advocating for a very low price without necessarily appreciating the cumulative costs that are involved in coming up with the final pricing.
Green Fuel recently stepped up efforts in rolling out the E85 fuel and to date they have increased the number of fuel outlets selling the product and fitting centres where motorists can have their vehicles fitted with conversion kits that will enable them to use the fuel.
Meanwhile, Zera has said they are in the process of carrying out a cost analysis of E85 pricing to determine whether or not it is overpriced and said they will issue a statement as soon as they conclude their investigations.
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