New Gasoline Pricing Introduced in Iran

TEHRAN, Iran — On Saturday, Iran rolled out updated price tiers for state-subsidized gasoline, marking the first change since a significant price increase in 2019 that led to widespread protests and a crackdown resulting in over 300 fatalities.

In Iran, affordable gasoline has long been seen as a fundamental right. This sentiment ignited mass protests in 1964 when escalating prices compelled the shah to send military vehicles onto the streets to replace striking taxi drivers.

However, increasing economic strains—driven by a declining national currency, the rial, and sanctions linked to Iran’s nuclear initiatives—are pressuring the government.

Even though the world’s cheapest gasoline has grown noticeably more expensive, the government’s hesitation to raise prices indicates a desire to avoid conflict with a populace already fatigued since Israel’s 12-day conflict with the nation in June.

“Our complaints have no consequences,” lamented Saeed Mohammadi, a teacher who also drives a taxi. “The government acts unilaterally and doesn’t consult the people.”

Pricing Structure Still Low

On Saturday morning at several gas stations north of Tehran, drivers seemed relaxed as they filled their tanks on a chilly, sunny day. There were police officers present, but no long waits or significant issues at the pumps.

The recently adopted pricing mechanism adds a new tier to Iran’s established subsidy system. Under this new structure, motorists will continue to receive 60 liters (15 gallons) monthly at a subsidized rate of 15,000 rials, or 1.25 cents per liter, while the next 100 liters (26 gallons) will still cost 30,000 rials, or 2.5 cents.

Once that limit is surpassed, a new rate of 50,000 rials per liter—around 4 cents—applies. Despite a fuel rationing system established in 2007, demand for inexpensive gasoline persists.

Even after this adjustment, Iranian gasoline prices remain among the lowest globally. The difference between production costs, shipping, and pump prices accounts for the subsidies granted by the Iranian government. According to the International Energy Agency, Iran had the second-largest energy subsidies worldwide in 2022, following Russia, with an estimated expenditure of $52 billion on oil subsidies that year.

Tehran economist Hossein Ragfal expressed doubt about the effectiveness of government subsidies, stating, “They’ve done little to reduce the budget deficit and have instead locked the economy in a cycle of inflation.”

Bank teller Hamid Rezapour, age 35, suggested that the government “must raise prices to stabilize the economy,” viewing this as an indirect tax that struggles to function in such a turbulent environment.

First Change Since Major Protests

This measure represents the most notable adjustment to Iran’s fuel subsidy system since the dramatic hike in 2019, which caused a 50% surge in subsidy prices and a staggering 300% increase in rates for excess purchases, triggering significant protests.

Security forces faced off against demonstrators, who went so far as to set fire to gas stations and banks. Amnesty International reported that the aftermath left at least 321 people dead, with thousands arrested.

Critics argue that every R10,000 rise in gasoline prices can trigger an inflation increase of up to 5%. Currently, Iran contends with an annual inflation rate hovering around 40%.

However, cheaper gasoline also creates jobs. The Islamic Republic boasts 25 million vehicles, including 3 million government-owned and 6 million motorcycles. An estimated 8 million Iranians work as taxi drivers, representing nearly 10% of the population.

“This is the start of correcting fuel consumption habits,” remarked Oil Minister Mohsen Pakhnejad, hinting at possible future price hikes as the government plans to review pricing every three months.

Lastly, taxi driver Mohammad Reza Asadi, age 60, expressed doubt that protests could effect any meaningful change. He recalled that although people took to the streets over rising gas prices in the past, they typically returned home exhausted and disillusioned.