Iran Oil Minister: Gasoline Rationing a Necessary Evil

EghtesadOnline: Oil Minister Bijan Namdar Zanganeh says so long as gasoline is not rationed, vehicle owners will not take fuel cards as seriously as expected.

News ID: ۷۴۸۳۲۰

01 September 2019

The minister says the initiative to resume use of the smart fuel cards without restarting the 2007 gasoline rationing system would be like beating the air, local news outlets reported at the weekend.

In his opinion “not only can fuel rationing system help reduce consumption, it also will help combat fuel smuggling” in regions bordering Afghanistan and Iraq.

The discrepancy in prices in Iran (7 cents/liter) and most neighboring countries (75 cents) has made fuel smuggling a highly profitable and tempting trade in and near the porous borders, according to Financial Tribune.

Gasoline rationing started in 2007. At that time motorists could buy 60 liters of subsidized fuel each month with a special card at 7,000 rials (70 cents) per liter (at the time a dollar was worth 10,000 rials).

Obliging motorists to use fuel cards at the pumps without resuming the rationing system can only help collect data and that is why the plan should be revisited, Zanganeh was quoted as saying.

Put simply, energy experts including Zanganeh believe that reactivating old fuel cards (without rationing) can neither help curb the rampant fuel smuggling nor create an incentive to reduce consumption and they have a proof for what they claim.

"Although the first phase of using fuel cards at filling stations commenced on August 13 in four mega cities, namely Tehran, Karaj, Isfahan and Tabriz, barely 5% of vehicle owners tend to use their cards at pumps," the minister said.

To compel car and motorcycle owners to use their own fuel card instead of the gasoline station attendants’, the National Iranian Oil Refining and Distribution Company imposed a limit, maximum 30 liters, on those who did not have their fuel cards as of August 23.

Nonetheless, latest NIORDC data show that of the total 86 million liters of gasoline sold per day less than 6 million liters are bought with the car owners' cards.

40 Million Cards

Putting the total number of cars in the country at 25 million, he said, "An estimated 40 million cards have been issued since 2007, of which three million were issued in the past six months" he said.

Almost all car owners in mega cities have their own fuel card, but they are averse to using. So “either all cards of the filling station attendants should be made unusable, or prices should rise.”

The Persian-language daily Donya-e-Eqtesad said in an article that the proposed scenarios are not feasible [not at least in the near future] because they may cause discontentment among the people. It suggested a solution to encourage car owners to use their own fuel cards.

"Despite the fact that motorists are not charged for filling up their tanks at the pumps, those who use attendants' card should be charged a certain amount [for example 10% of the purchased fuel price] as commission so that they are impelled to use their own cards," the economic newspaper said.

Noting that no decision has yet been made on raising gasoline prices or rationing fuel, Zanganeh said the Oil Ministry will determine the new prices if and when the government decides.

In a nutshell, energy officials are of the opinion that the card system should not have been scrapped in the first place. Now that it has been reintroduced, fuel should be rationed to get the desired results. If not, neither smuggling nor consumption can be controlled.

Regarding gasoline smuggling, the minister reiterated that the reported numbers are mostly guesstimates and there is no reliable data.

It is often reported that between 20 and 40 million liters of gasoline is smuggled to neighboring countries every day. And why nothing has been done about this scourge is a question that remains to be answered.