Stopgap Fuel Card Rules Unhelpful

EghtesadOnline: So long as gas station attendants' cards are usable, the plan to reintroduce fuel cards cannot be implemented efficiently and transparently, a board member of Al-Zahra University in Tehran said.

News ID: ۷۸۴۸۱۲

17 August 2019

"As per the directive issued by the National Iranian Oil Refining and Distribution Company, car and motorcycle owners in four mega cities -- Tehran, Karaj, Isfahan and Tabriz  -- are obliged to use fuel cards as of August 13. However, they will not comply up until attendants’ cards are removed for good from stations," Mohammad Javad Noforsati told Fars News Agency.

NIORDC has announced that vehicles without a card cannot buy fuel over a certain limit (40 liters) in one day, but the expert says such stopgap measures will not compel vehicle owners to play by the rules and use their own cards, (not at least in the short-term).

Referring to the plus pints of the scheme (when and if it is fully implemented), he said gasoline consumption in 2006, one year before the fuel cards were introduced, amounted to 73 million liters per day. The figure fell to 64 ml/d in 2007 when the plan came into force, Financial Tribune reported.

"Interestingly enough, gasoline consumption between 2007 and 2015(when the plan was revoked) barely increased by eight million liters and reached 74 ml/d in 2015."

It is expected that the new plan can reduce consumption by 10 ml/d in less than six months. As per official data, average daily gasoline consumption has increased from 87 million liters last year to 95 million liters now.

Smuggling

Highlighting other benefits, the expert said "the longer it takes to carry out the plan, the more fuel will be smuggled".

Fuel cards do not necessarily mean rationing fuel, but they help curtail consumption and smuggling.

He added that fuel cards can provide oversight bodies detailed information to track consumers and tankers across the country.

Although a great deal of fuel is smuggled before reaching the gas stations, "fuel card data centers make it more difficult (if not impossible) for the tankers to change course after they leave the refineries," he added.

Noforsati insists that by not raising gasoline prices (gradually) over the last three years the government made a mistake because the wrong policy, among other things, paved the way for massive smuggling across the borders.

Iran has one of the world's cheapest gasoline. While average international price for the fuel is about 100 cents/liter, it is sold for 10 cents in Iran.

Comparing fuel prices in Iran and neighboring countries shows that despite the high risks, smugglers dare to engage in the illicit trade because of high profits.

For instance, a 20-liter container of gasoline costs $1.4 in Iran and can be sold for at least $20 near the borders.

Turkey, Iraq, Pakistan and Afghanistan are common destinations for the smugglers and their cohorts. Daily gasoline consumption in Iran is 95 million liters of which 10 million liters is smuggled from the porous frontiers.

Shifting to CNG

"Iran has one the biggest gas grids in the world and although CNG is less expensive than gasoline, we continue to manufacture gasoline-powered cars instead of natural gas vehicles (NGVs)," he rued.

One cubic meter of CNG costs 4,140 rials (3.5 cents), while a liter of gasoline is sold for 10 cents, meaning filling a tank with 20 cubic meters of gas costs almost 3 times less compared to the eco-unfriendly fossil fuel.

NGVs use natural gas as opposed to fuel. These vehicles typically use one of two varieties of natural gas: CNG or liquefied natural gas (LNG).

Referring to the billions of dollars the government pays in fuel subsidies, observers say shifting from gasoline to CNG is a compulsion the state can continue to delay at its own peril.