Determination – wholesale price for fuel ethanol – 1 January 2023

Wholesale price of 167.2 c/L for fuel ethanol from 1 January 2023

IPART has determined a reasonable wholesale price for fuel ethanol from 1 January 2023 of 167.2 cents per litre (excluding GST). This is 18 cents or around 12% higher than the determined price for the previous period from 1 January 2022 to 30 December 2022, which was 149.3 cents per litre. This is mostly due to the higher mill-gate price.

The increase in mill-gate price and fuel costs is likely to continue with the war in Ukraine affecting the agriculture and energy markets.

We want your feedback on proposed changes

We set wholesale prices based on an estimate of the market price of importing ethanol (the “import parity price” or “IPP”). It is based on a nine-month average of weekly import parity price estimates based on the lowest cost origin for ethanol from either the US or Brazil.

We are proposing to make 2 changes to how and when we set ethanol prices in future reviews:

• Determining the wholesale price for ethanol quarterly, rather than yearly, due to volatility in the market conditions.
• Continuing to use the rate of excise at the time of the month prior to the determination, rather than the 9-month historical average.

Our determined import parity price from January 2023 uses the current rate of excise as at December 2022, rather than an average for a period of 9 months to November 2022. This is because the fuel excise rate was temporarily halved from 30 March 2022 to 28 September 2022.  Using a 9-month average produces a lower value of fuel excise, which would not represent the likely value of excise next year from the date the determined price applies.

We propose to maintain this change in our import price parity model for future price determinations, as we consider that the current rate of excise is a better indicator of the future fuel excise than the historical average.