Social media is awash with another impending fuel increase. Unlike the previously failed increase of barely a week ago which was based on a whim, the latest increase is not about foreign currency.
According to those doing the “leaks”, the latest increase is a result of an increase in ethanol prices. Traditionally, petrol sold within Zimbabwe is blended with ethanol to reduce our import bill. Despite motorists making all sorts of complaints, this has been done for decades even before the economic crisis.
Blending petrol with ethanol saves millions of dollars. Right now Zimbabwe is facing a severe foreign currency shortage and any saving measure is quite welcome. Not only is blending well for our balance of payments, but it is also touted as environmentally friendly as ethanol is a renewable source of energy.
This is not to say that ethanol blending is not without problems. Some of the problems of blending include:
- Ethanol yields less energy when compared to petrol, it’s not a huge difference really but it’s there
- Blending beyond 10% (E10) requires engine modifications that can be expensive
- Ethanol is difficult to store
- You need sugar to make ethanol, people need sugar for direct and indirect consumption too, so there will be competition in years when there is low sugar supply
Back to the rumoured price increase
According to the captured screenshot above maximum pump prices will be as follows:
- Petrol RTGS$ 5.26 per litre
- Diesel RTGS$ 5.07 per litre
What does diesel have to do with ethanol you ask? I have zero idea- maybe they taught that in some chemistry class I missed. Given the relatively modest increase in the price of diesel, maybe it’s just as a result of a movement in the exchange rate they are using.
If you want to learn more about ethanol production in Zimbabwe read our notes here
If you want to learn more about the balance of payments read this post