🔶 Why a renewed increase in fuel prices is risky for Iran?

🔻 Report by Amir Sultan-zadeh

Iran is approaching another of its most sensitive economic and social decisions: a change in gasoline prices. The government is facing a widening gap between domestic fuel production and consumption. Fatemeh Mogharrani, the government spokesperson, has said that action in this regard is “certain and unavoidable”; although it is not yet clear whether this measure will be carried out through new rationing, an increase in the price, or a combination of both. Iranian media have reported that the third and highest gasoline price could reach 10,000 tomans per liter. Of course, this figure has not yet been officially confirmed.

Gasoline in Iran has never been only an economic issue. The most recent sudden and major increase in fuel prices in Aban 1398 (November 2019) led to nationwide protests and one of the bloodiest crackdowns in the history of the Islamic Republic.

This time too, the government faces a more complex issue. Iran had already been consuming more gasoline than its domestic production even before the recent war. Damage to fuel infrastructure and limits on imports have made managing this imbalance more difficult and costly.

Reports about the possible increase of the third tier rate to 10,000 tomans have raised concerns; though the government says that most drivers will remain covered by existing fuel rations. Based on the official account, at least 70% of owners of private vehicles consume more than their subsidized ration. Therefore, the higher rate would largely apply to drivers who use more than roughly 110 liters per month.

Critics, however, are not convinced. They say that focusing solely on the new price rate ignores the broad effect of fuel prices on the entire economy, especially transportation costs.