Zimbabwe: Ethanol Blend Pushes Fuel Prices Down

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FUEL prices in Zimbabwe are now on a downward trend as the oil industry absorbs the full impact of locally manufactured fuel grade ethanol from Chisumbanje.

he recent price decrease is in sharp contrast to the patterns in other countries in the region where prices have been rising in response to developments in the global market.

The price of a litre of blended fuel ranges between US$1,32 and US$1,36 at most local service stations. Unleaded petrol has dropped from US$1,44 per litre to between US$1,37 and US$1,40.

Economist Mr Brains Muchemwa welcomed the use of blended fuel, as it was “good” for the economy.

“The current account deficit at around 35 percent of GDP is not sustainable and requires such initiatives as ethanol fuel that allows Zimbabwe to improve on national savings,” he said.

“With cars now increasing at a rate of 35 000 per annum, compared with just around only 2 800 for the whole year in 2008, Zimbabwe will be spending more on fuel each year and a sustainable solution that conserves foreign currency is commendable,” he said.

Analysts have said this development is a reflection of the positive impact of a domestic fuel source, adding that bigger gains await the country and the consumers in particular, if the minimum blend ratio is taken up to 20 percent ethanol and 80 percent petroleum.

“It’s quite clear petroleum dealers are reacting to the presence of a cheaper alternative fuel on the market in the form of E10 (ethanol blended fuel) and they are seeing the need to lower the price of unleaded fuel in order to remain competitive.

“A lower price factor pushes sales volumes towards a cheaper option and these positive gains will impact on the whole economy, fuel being one of the major drivers of inflation.

“A blend ratio of up to 20 percent ethanol would undoubtedly present savings on fuel that are more than treble the current figures,” said an economist who asked not to be named.

ZNCC immediate past president and secretary-general of the Comesa Business Council Mr Trust Chikohora hailed the ethanol initiative.

“Certainly, a local source whose cost we can control locally, to a certain extent, will reduce the cost of fuel and will make us less susceptible to fluctuations in international oil prices.

“There are also savings in foreign currency that can be realised which will help address our liquidity crunch.

“There are green issues to consider in line with reducing the damage to the ozone layer. The field of bio-fuels is expanding and more research needs to be done in this area. Electrical cars which run on batteries have also been shown to be more efficient.”

In many ethanol-producing countries, mandatory ethanol blends vary from E10 to as high as E25 in Brazil. Issues of ethanol supply, limit most countries experiencing lower mandatory blends. European countries, for example, do not have the advantage of land to grow crops for ethanol.

Calls for mandatory blending have been echoed at numerous other economic forums, with submissions that a 20 percent mandatory blending policy would not only ensure the viability of the ethanol sector, but would also send positive messages about Zimbabwe as an investment destination.

‘We have to be as inward-looking as possible if this economy is to recover from the 10-year stagnation. A 20 percent minimum blend policy has not only been proven to be safe for all vehicles today, but is more applicable for an economy like ours as it will ensure a reduction in the volumes of cash leaving this country for imports.

“A higher than 10 percent mandatory blend policy achieves the twin goals of limiting our dependence on imports while providing the motoring public with a much cheaper and cleaner fuel source. Positive economic growth can only be fostered by developing a vibrant localised industrial sector – we are presently more of a market economy spending billions every year on foreign products and effectively supporting jobs and tax revenues in other countries.”

Zimbabwe is on the verge of a new page in the performance of the economy but in the absence of concrete policy measures the potential may be lost.

About 50 governments, mostly in ethanol-producing countries, have adopted mandatory blending ratios ranging between E5 (5 percent ethanol, 95 percent petrol) and E25 as a protectionist measure allowing huge revenue savings for consumers and the treasury.

The mandatory blending ratio in each country is dependent on the locally available or imported volumes of ethanol. On the home front, Zimbabwe developed a biofuels policy aimed at promoting the use of renewable energy sources in reaction to concerns that conventional non-renewable fossil fuels are not sustainable.

Through Green Fuel, Zimbabwe hosts Africa’s largest ethanol plant with a daily capacity of 700 000 litres when fully commissioned.

The national fuel monthly import bill is currently US$50 million and a 20 percent minimum blending policy would present monthly savings of up to US$10 million which would improve the liquidity crisis through domesticated cash circulation.

In addition, whereas localised production of ethanol would create 10 000 jobs, the importation of fuel would create an average 100 jobs in retailing.

With fossil fuels getting dirtier, more costly and riskier to extract, such as the recent oil spill in the Gulf of Mexico, huge multinational oil companies, such as Shell and BP, have invested billions in ethanol production, an indication that ethanol is the fuel of the future.

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