Iran: Gasoline Prices in Limbo

EghtesadOnline: The National Iranian Oil Refining and Distribution Company has so far received no order from the Oil Ministry to raise gasoline prices or reintroduce the gasoline rationing system that ended in 2015, a spokeswoman of the company said on Saturday.

News ID: ۷۴۷۱۱۶

22 April 2019

"We are not policymakers -- we just implement rules and regulations of the ministry and no official order to this end has been issued yet," Ziba Esmaeili was quoted as saying by ISNA.

Denying rumors on social media about higher fuel prices and quotas for the past few months, she noted, All the numbers, news and reports are “untrue guesstimates." She did not elaborate.

No new plan to increase fuel prices (one of the cheapest in the world) is being studied and earlier suggestions have been rejected, Financial Tribune quoted her as saying.

Based on a proposal that was rejected, each Iranian would get 30 liters of fuel per month by using the smart fuel cards. Those who did not own cars could, according to the unusual plan, be allowed to sell their monthly quota to the Oil Ministry.

Analysts say such measures are a recipe for corruption and show why it is highly unlikely to be put into practice.

NIORDC data show Iranians buy close to 97 million liters of gasoline every day. The company daily produces 105 million liters of gasoline.

High Temptation

"It is highly unlikely that all the fuel produced in the country is used domestically. Large volumes are sold in the border regions," Hassan Khosrojerdi, a member of Iran's Oil Product Exporters' Association said, noting that the discrepancy in prices in Iran (10 cents/liter) and most neighboring countries (75 cents) have made fuel smuggling a highly tempting trade in contraband.

Introducing the previous rationing system and increasing fuel prices have been tabled as necessary steps not only to bring down rising consumption but also to battle smuggling. Neither has been implemented.

Energy officials, namely Oil Minister, Bijan Namdar Zanganeh, believe the latter cannot be implemented due to the almost certain inflationary impact on people's lives. “But the former should be reintroduced.”

In contrast to many countries, in Iran the bulk of food, fruits, vegetables, dairy and other essential goods are transported by road, intercity, intracity and across the thousands of villages spread out across the country.

Expanding rail transport has been one of the key areas where policymakers have been too slow to act and this is the primary, and understandable, reason why the government is hesitant to increase fuel prices that without doubt would result in higher food prices. The people’s purchasing power has already been sinking due to galloping inflation, the new US sanctions and tanking of the rial since last spring.

Mahmoud Ahmadinejad, the former president, started the rationing plan in 2007 to monthly sell 60 liters of subsidized gasoline to each private car at the rate of 7,000 rials/liter. Quotas for taxis and public vehicles were higher.

In 2015, the government stopped allocating subsidized gasoline to passenger vehicles and gasoline was sold without at the single price of 10,000 rials (10 cents) without any restrictions.

In the past four years the price of gasoline has not changed whereas tariffs for electricity and gas have risen on a regular annual basis.