Iran's Pezeshkian mulls raising gasoline prices

Iranian President Masoud Pezeshkian slammed the nation's heavy subsidy on petrol, calling it a “challenge” in drawing up the country's annual budget, the semi-official Fars News Agency reported on October 22, amid widespread rumours about a fuel price hike.   

“The actual cost of petrol, excluding the price of crude oil, works out to around IRR80,000 ($0.133) per litre,” Pezeshkian told lawmakers before putting forward next year's budget bill to parliament.  

In Iran, petrol is sold through a rationing system at the pump, under which drivers receive 60 litres of heavily subsidised fuel per month for IRR15,000 (around $0.025) via unique cards. Any additional petrol is made available to motorists at twice the subsidised rate while using fuel cards.

Even with a petrol price of IRR30,000 per litre, only about one-third of the actual production cost, as per Pezeshkian, is paid at filling stations.

The Iranian president also hit out at the high petrol usage, saying that this year's daily consumption was 40% higher than in 2019, the last time Iran hiked petrol prices. He noted that the surge in consumption had occurred despite population growth and the rate of per capita gross national income being much lower.

Five years ago, the government's decision to raise petrol prices by 200% sparked widespread street protests, which resulted in over 200 deaths.

Pezeshkian said that the growing trend in consumption forced the government to spend IRR900,000bn ($1.5bn) on petrol imports this year.

“If this trend continues, the government will have to allocate IRR1,300,000bn ($2.17bn) next year,” he warned.

Pezeshkian added that each litre of imported petrol costs the government IRR300,000 ($0.5) to IRR400,000 ($0.67).

He has on several occasions come out against the allocation of such a hefty budget for petrol imports, calling it “irrational” to buy petrol at free market dollar prices and sell it with massive subsidies.

Iran has been forced to import petrol since 2021 to bridge the gap between domestic production and consumption.

According to the Iranian Oil Ministry, daily petrol consumption in half of the current Persian calendar year (March 20-September 21) averaged 124.5mn litres, while domestic refineries cranked out 110mn litres, suggesting a 14.5mn litre shortfall.

However, the state-run fuel distributor said the daily mismatch between petrol production and demand narrowed to 1mn litre in the seventh month due to increased output at Iranian refineries.

In October, Oil Minister Mohsen Paknejad denied any plans to hike petrol prices. It came after a lawmaker said that the government would likely raise petrol prices by 20% next year.

The Iranian government insists on taking “non-pricing policies” to curb and manage fuel consumption, fearing a repeat of 2019 deadly protests.

On October 6, the Oil Ministry adopted its first non-pricing measure by capping off motorists' use of subsidised petrol at the pump. A statement said drivers could only top up their tanks twice a day, with a cap of 50 litres per fill-up, using their fuel cards.