The move by the Zimbabwe Energy Regulatory Authority (Zera) last week to reduce the mandatory blending of petrol and ethanol before a dramatic reversal in a matter of hours pointed to serious problems in the fuel supply matrix.
Zera issued a brief statement where it announced that “the blending of anhydrous ethanol with unleaded petrol has been reduced from E20 to E10.”
A few hours later, the regulator issued another statement saying the blending would remain at 20% after it got assurances from the government and ethanol suppliers that the levels could be sustained.
Green Fuel, which is owned by a businessman with strong connections to the country’s leadership, enjoys an unfettered monopoly in the supply of ethanol.
Petroleum companies are compelled by law to blend petrol with ethanol before it is sold on the open market.
Zera’s statements last week came at a time when the fuel shortages in the country are getting worse and indications are that this has to do with inadequate supplies of ethanol.
The reduction of ethanol blending would not have been without precedence.
Last year, Zera reduced blending from E10 to E5 before raising it again to E20 after production at Green Fuel’s Chisumbanje sugar fields improved.
According to the government, blending of petrol with ethanol reduces the fuel import bill and ensures stable supplies of fuel.
For motorists, however, there is no evidence that the blending has been beneficial.
Instead many complain that blended petrol does not last and damages car engines.
One of the most likely reasons why the costs remain high is that Green Fuel enjoys a monopoly and is not under any pressure to charge prices that will cushion motorists.
The monopoly is also counterproductive in that when Green Fuel cannot supply enough ethanol the country is brought to a standstill.
It would be tragic if the government last week bent backwards to accommodate Green Fuel after Zera had correctly identified inadequate ethanol supplies as the reason behind the worsening fuel shortages and recommended a reduction in the blending threshold.
A monopoly at whatever level of the economy should not be allowed to hold the country at ransom.
It is incumbent upon the authorities to explain the curious decisions taken by Zera over the blending levels to remove any suspicions that the government was arm twisted.
The fuel shortage that has gone on for more than a year poses one of the biggest threats to economic revival and it needs a holistic approach, including doing away with monopolies.