TEHRAN, Iran (AP) — On Saturday, Iran implemented a new pricing tier for its nationally subsidized gasoline in an effort to control soaring costs for the first time since a price hike in 2019, which led to widespread protests and a brutal crackdown resulting in the deaths of over 300 individuals. Cheap gasoline has traditionally been perceived as a birthright among Iranians, with mass demonstrations occurring as early as 1964 when an increase in prices led the shah to deploy military vehicles onto the streets due to striking taxi drivers.
The Iranian theocracy faces increasing economic pressure due to the rapid depreciation of its currency, the rial, compounded by sanctions tied to Tehran's nuclear ambitions. This situation has rendered the availability of some of the world’s cheapest gasoline—priced at mere pennies per gallon—significantly more burdensome. The government's cautious approach to raising prices indicates a desire to avoid potential backlash from a weary populace, especially after Israel's recent 12-day military campaign against the country.
Saeed Mohammadi, a teacher and part-time taxi driver, expressed his frustration, stating, “Our discontent has no result. The government does whatever it likes. They don’t ask people if they agree or not.”
The revised pricing system provides a third tier to Iran's long-standing subsidization framework, allowing motorists to continue purchasing 60 liters (15 gallons) per month at a subsidized price of 15,000 rials per liter (equivalent to 1.25 U.S. cents per liter). The next 100 liters (26 gallons) will be available at 30,000 rials per liter (2.5 cents), while any additional fuel will be priced at 50,000 rials per liter (approximately 4 cents). Despite the introduction of fuel rationing in 2007, demand for this exceptionally cheap gasoline remains unabated.
Even with the newly adjusted rates, gasoline prices in Iran continue to rank among the lowest globally. The disparity between production and delivery costs versus the retail price reflects the extensive subsidies funded by the Iranian government, which the International Energy Agency (IEA) reported as being the second highest in the world in 2022, following Russia. Iran's oil subsidies reached $52 billion that year, with officials acknowledging that tens of billions of dollars are spent annually to artificially keep energy prices low.
Economist Hossein Raghfar noted that since 2009, gasoline prices have surged 15-fold, casting doubt on the effectiveness of government subsidies. He stated, “Not only did it fail in lessening the budget deficit, but it also trapped the country’s economy in a negative loop of inflation and budget deficit.”
Hamid Rezapour, a 35-year-old bank teller, asserted that the government had “no choice except to increase the price to manage the country’s economy,” describing the price hike as an indirect tax that, in the current disorganized economic climate, is minimally effective.
The latest fuel price adjustment marks the most substantial change to Iran's subsidy structure since 2019, when a sudden 50% increase in subsidized prices and a 300% hike in prices for purchases above the set quota led to nationwide unrest. Security forces responded to the protests with violence that resulted in at least 321 deaths, according to Amnesty International, and thousands of detentions. Critics warn that every 10,000-rial increase in gasoline prices could potentially trigger a 5% rise in inflation, with the current nationwide inflation rate hovering around 40%.
Nevertheless, the availability of low-cost gasoline serves as a livelihood for many Iranians, with approximately 25 million vehicles—including 3 million public and government-affiliated cars, along with 6 million motorbikes—registered in the country. Over 8 million Iranians reportedly work as taxi drivers through ride-sharing platforms, reflecting a significant portion of the population's reliance on affordable fuel for employment opportunities. Oil Minister Mohsen Paknejad mentioned that the adjustments are designed to begin correcting fuel consumption trends. Officials have indicated that further price increases may be forthcoming, with reviews of gasoline pricing conducted every three months.
Taxi driver Mohammad Reza Assadi expressed skepticism regarding the potential for further protests to effect change, noting that while people have taken to the streets over past increases, they ultimately returned home feeling exhausted and hopeless.
