For a long time and in most parts of the world diesel has always been cheaper than Petrol. It’s just one of those facts of life that is pretty much established. In the two latest price hikes however, ZERA has priced diesel higher than petrol. Why?
Well, when this first happened one of the officials at ZERA claimed that this was because diesel is in higher demand. That made little sense to us and a lot of people. The fuel sector is government-controlled and given the importance of diesel to industry, it seemed a little ridiculous to price it higher merely based on demand.
Petrol is blended
Well, ZERA has finally given us the reason why diesel is now more expensive. The reason is pretty simple and makes economic sense. Petrol is being blended using locally produced ethanol in an 80:20 ratio (E20).
Because no foreign currency is required to buy this ethanol it makes Petrol slightly cheaper. This is because when you buy a litre of petrol you are actually buying 800ml of imported petrol that has been mixed with 200ml of ethanol. Exchange rate fluctuations only apply to the 800ml and not the 200ml.