Iran: Gas Rationing and the Affirmative Side

EghtesadOnline: Despite the drawbacks and mounting grievances about the sudden gasoline rationing plan, the new policy would help the National Iranian Oil Company not to import gasoline in the foreseeable future, a former head of the Iranian Fuel Conservation Company said.

News ID: ۷۸۵۱۱۰

08 December 2019

“There is some link, among others, between the high rate of gasoline consumption and low prices,” Nosratollah Seifi was quoted as saying by ILNA.

Put simply, the cheaper the fuel the less judicious consumers become, Financial Tribune quoted him as saying.

Referring to data issued by the National Iranian Oil Products Distribution Company, he noted that gasoline consumption in the current fiscal that will end in March 2020 “will exceed 32 billion liters.”

On November 15, NIOPDC announced that private car owners would be able to buy 60 liters of subsidized gasoline every month with a special card at 15,000 rials (13 cents) per liter. Additional purchases cost double.

“Had the fuel not been rationed, annual consumption would exceed 41 billion liters, or 110 million liters a day in less than three years,” he warned, adding that NIOC’s maximum refining capacity is 105 million liters per day.

There are close to 20 million cars in Iran and if each needs two liters of gas per day that would mean 40 million liters and after adding taxis, the figure would amount to 60 ml/d. Prior to the rationing and raising prices, motorists were using 95 million liters every 24 hours.

It is generally believed that consumption patterns in Iran are far from sustainable and one reason why consumers do not care about appeals for judicious use of power and energy is that pump prices are very low compared to most countries in the region and beyond.

Pricing Policy

Adopting an effective pricing policy and revising (water, power and gas) tariffs can have the desired effect and help cut consumption rates, some experts say.

It is noteworthy that the menace of overconsumption in different sectors namely water, natural gas and power has become a serious concern as time goes on and economic conditions become difficult.

Annual water and gas consumption in Iran (with 80 million people) surpasses 100 billion cubic meters and 200 billion cubic meters respectively, which are not even comparable with consumption level in highly populated countries like China.

The Majlis Research Center says while average global electricity consumption rises by about 3% per annum, in Iran demand for power jumps to almost 10% on a yearly basis, which is alarming.

Added Advantage

An added advantage of the fuel rationing is that there will be excess supply that will be offered on the energy market, the former IFCC official said.

NIOPDC’s daily output is 115 ml/d, of which around 95 ml/d is used locally and the rest is sold via the Iran Energy Exchange.

Offering gasoline on energy bourse started in August and was well received and the rationing plan will certainly raise the surplus available for export on IRENEX.

An estimated 2 billion liters of gasoline has been sold in the energy market since summer.

Seifi, however, did not deny the inflationary impact of high gasoline prices on low-income groups, nor did he spare the hubristic local state-owned automakers who continue to manufacture low-quality vehicles at exorbitant prices.

He said increasing energy prices can help improve social welfare provided that the car industry focuses on improving its technology and fuel efficiency. The other key necessity is improving public transportation.