Iran prepares for possible fuel price increase
Iranian authorities are preparing the population for a possible new increase in fuel prices, as maintaining the system of substantial fuel subsidies is becoming an increasingly heavy burden on public finances. Al Jazeera English reports. A final decision is expected in the coming weeks.
President Masoud Pezeshkian said that fuel prices in Iran are significantly lower than in most other countries. According to him, producing a litre of petrol at refineries costs the government 1.3 million rials, while the lowest rate for the population is 15,000 rials per litre.
Quotas and consumption
Private car owners have two additional price tiers — 30,000 and 50,000 rials per litre. Each has a monthly limit, and subsidised fuel can only be purchased using a fuel card. The lowest rate applies to a quota of 60 litres per month.
Since late March, authorities have reduced the quota for the second price tier from 100 to 70 litres, and after the July escalation of hostilities between Iran and the United States over the Strait of Hormuz — to 50 litres. Iranians consume approximately 135 million litres of fuel per day, while production amounts to about 121 million litres per day, according to the authorities.
More current news is available on the UA.News Telegram channel Telegram.
Options for the government
Esmaeil Saghb-Esfahani, head of the state body for optimising energy consumption, named three possible scenarios. The first involves keeping prices unchanged but halting the operation of petrol stations after they exhaust their allocated volumes of petrol. The second involves giving all citizens, including those without cars, approximately 30 litres of fuel per month at the lowest rate, with the option to sell unused quota.
The third option is to liberalise prices. Reports say the government is considering a price of 872,000 rials per litre, which is closer to the cost of production. This rate was to be introduced under a pilot scheme at 204 petrol stations in Kerman province, but it was cancelled at the last moment.
First Vice President Mohammad-Reza Aref said that the cheapest rate with a 60-litre quota should be retained, while the volume of the second quota may be gradually reduced. According to the Statistical Center of Iran, prices in July were 88% higher than a year earlier, while food inflation exceeded 128%.
