TEHRAN, Iran (AP) – In a significant move aimed at addressing the rising costs of fuel, Iran introduced a new tiered pricing system for its nationally subsidized gasoline on Saturday, marking the first price adjustment since a hike in 2019 that triggered widespread protests resulting in over 300 deaths. The government's reluctance to increase gasoline prices stems from the fear of exacerbating public discontent, particularly following a recent 12-day conflict with Israel in June.
For generations, inexpensive gasoline has been perceived as a fundamental right in Iran, leading to mass protests as early as 1964 when a price hike led to military deployments to replace striking taxi drivers. However, the Iranian government now grapples with the dual challenges of a rapidly depreciating rial currency and economic sanctions related to its nuclear program, further complicating the situation regarding fuel costs.
The newly implemented pricing structure allows motorists to continue purchasing 60 liters (15 gallons) monthly at a subsidized rate of 15,000 rials per liter, equivalent to 1.25 U.S. cents. The next 100 liters (26 gallons) remain priced at 30,000 rials per liter, or 2.5 cents. Purchases exceeding this quota are now categorized under a new pricing scheme set at 50,000 rials per liter, approximately 4 cents. Despite these adjustments, Iranian gasoline prices remain among the lowest globally.
The disparity between production and delivery costs and the pump price reflects a substantial subsidy by the Iranian government. According to the Paris-based International Energy Agency (IEA), Iran ranked second in the world for energy subsidy costs in 2022, trailing only Russia. The IEA estimated Iran's oil subsidies reached $52 billion, with officials acknowledging that tens of billions are spent annually to maintain artificially low energy prices.
Economist Hossein Raghfar expressed skepticism regarding the effectiveness of the government's subsidy strategy, noting that gasoline prices have surged 15-fold since 2009. He emphasized that instead of alleviating the budget deficit, the subsidies have entrenched inflation and fiscal issues within the country. Meanwhile, bank teller Hamid Rezapour commented that the government had no alternative but to increase prices to sustain public needs, although he perceived the price hike as an indirect tax during challenging economic times.
The recent changes mark the most substantial revision to Iran's fuel subsidy system since the dramatic price hike in 2019, which led to nationwide protests, property damage, and a severe crackdown resulting in at least 321 deaths and thousands of detentions. Critics warn that any increase in gasoline prices could contribute to up to a 5% rise in inflation, which already hovers around 40% annually.
Nonetheless, the availability of cheap gasoline is crucial for employment in a country boasting 25 million vehicles, including 3 million public and government-associated cars. Notably, over 8 million Iranians engage as taxi drivers through various online platforms, contributing to the economy in an environment where Uber has 8.8 million drivers worldwide.
Oil Minister Mohsen Paknejad described the price adjustment as a necessary step toward reducing fuel consumption. Officials suggested that further price increases could be anticipated, as the government plans to review prices quarterly. Taxi driver Mohammad Reza Assadi conveyed a sense of resignation among the populace, reflecting on past protests that ultimately yielded little change, leaving the public feeling exhausted and hopeless.
