TEHRAN, Iran (AP) – Iran is set to implement a new gasoline pricing tier on December 6, 2023. This change will raise the cost of fuel purchased beyond monthly quotas to 50,000 rials (approximately 4 cents on the Iranian exchange market) per liter. This measure introduces a third pricing level to the country’s longstanding fuel subsidy system.
According to officials, motorists will still receive 60 liters of gasoline per month at a subsidized rate of 15,000 rials per liter. Additionally, a second tier will offer 100 liters at 30,000 rials per liter. Consumption exceeding these limits will now incur the new rate of 50,000 rials, which previously was available only through unofficial station cards managed by fuel-pump attendants.
For years, many drivers utilized spare cards after using their own monthly allocation, paying the 30,000-rial price for excess gasoline. However, station operators have reported that the government has increased the price on those cards to match the new official rate of 50,000 rials ahead of the system’s official launch.
As part of the new pricing structure, gasoline rates will be reassessed every three months, coinciding with the start of each season. This change is designed to enable the government to adjust prices quarterly, a move officials claim aims at reducing excessive consumption and alleviating financial burdens on state resources.
Under the revised rules, individuals who own multiple vehicles will receive a fuel card for only one vehicle. Furthermore, new cars purchased will no longer come with a gasoline allocation. This adjustment marks a significant change to Iran's fuel subsidy framework since 2019, which witnessed a sudden 50% increase in subsidized prices and a staggering 300% surge for purchases exceeding monthly quotas, triggering widespread protests across the nation.
Gasoline rationing was initially introduced in Iran in 2007, with government assurances that savings from reduced fuel consumption would be allocated to all citizens. However, as economic conditions worsened, the government discontinued transfers to middle- and higher-income households. Iranian officials have consistently urged citizens to minimize fuel consumption, although detractors point out that the poor quality of gasoline and the outdated technology of domestic vehicles leave many drivers with limited options for reducing fuel use. Cars produced by local manufacturers typically consume fuel at high rates, lacking any significant efficiency improvements.
Some economists aligned with the government contend that the current price of gasoline is substantially below its actual cost. They assert that when considering crude extraction, refinery processing, transport, storage, and distribution, the true local cost for fuel stands between 100,000 and 150,000 rials per liter. This discrepancy, they argue, forces the state to absorb substantial losses to maintain low pump prices for consumers.
The introduction of the new 50,000-rial pricing tier is anticipated to gauge public sentiment amidst rising inflation and decreasing purchasing power. Nonetheless, officials have not indicated whether further price hikes will occur during the next quarterly review. The upcoming policy adjustments and their financial ramifications are expected to be closely monitored by both the government and the Iranian populace as the country grapples with its ongoing economic challenges.
