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As the Iranian regime grapples with an alarming budget shortfall, Masoud Pezeshkian’s administration reportedly considers raising gasoline prices to address the deficit. However, this controversial move, which risks triggering mass protests and worsening the economic strain on ordinary citizens, is not an inevitable solution. In fact, it is a policy choice rooted in the regime’s refusal to cut spending on other non-essential sectors, particularly in areas that benefit the ruling establishment.
The Pezeshkian government is facing a substantial financial deficit, estimated at over 1,000 trillion rials in the first half of 2024 alone. This situation worsened after the administration withdrew 350 trillion tomans from the National Development Fund just to manage immediate expenses. Now, with limited options, the regime is leaning towards hiking gasoline prices—a measure that could inflame public discontent, reminiscent of the nationwide uprising following the 2019 price hikes.
Iran’s ongoing fuel crisis stems from a combination of inefficient consumption, outdated vehicles, and mismanagement of the energy sector. Daily gasoline consumption in Iran is alarmingly high, ranging from 120 to 140 million liters, which is exacerbated by the country’s reliance on inefficient, outdated vehicles that consume significantly more fuel than global standards. Many vehicles on Iranian roads require up to 15 liters of gasoline per 100 kilometers, which is far above the international average. This inefficient consumption continues despite efforts to raise prices, as Iran’s automotive industry has failed to modernize. As Ramazanali Sangdovini, a member of the parliamentary Energy Committee, pointed out, addressing the inefficiency of these vehicles is crucial to solving the fuel crisis, but the state has yet to take meaningful action.
#Iran News in Brief
Jalal Rashidi Kuchi, a member of the regime’s parliament, expressed concerns about the consequences of raising #gasoline prices, stating, “Fundamentally, our approach to gasoline has been wrong. Even now, if we tamper with gasoline prices, people will take to… pic.twitter.com/hT5DpjIEU2— NCRI-FAC (@iran_policy) August 23, 2023
Moreover, Iran’s fuel production infrastructure is under strain. Refineries are operating at maximum capacity, but still cannot meet the gasoline demand. This production shortfall is further aggravated by Iran’s natural gas problems, which hinder the availability of feedstock for refineries. According to Sangdovini, diversifying Iran’s fuel portfolio to include more CNG (compressed natural gas) and LPG (liquefied petroleum gas) could alleviate some of the pressure, but this has yet to be fully realized.
The combination of high consumption, inefficient fuel use, and production limitations are key factors driving Iran’s fuel crisis.
This additional context highlights that Iran’s fuel crisis is not only a result of financial mismanagement but also a failure to address deep-rooted inefficiencies in its consumption and production systems.
Even as officials promote plans to improve gasoline consumption efficiency and phase out outdated vehicles, these efforts appear to lag behind the pressing budgetary needs. Sangdovini further noted that the state recognizes it could avoid price hikes by enhancing fuel efficiency, provided that 2,500 billion tomans are allocated to an energy optimization fund. However, none of these initiatives seem sufficient to address the immediate fiscal challenges.
One particular leaked communication, written and signed by the Supreme Leader #Khamenei, and dated December 12, 2019, just weeks after a nationwide uprising sparked by a rise in gas prices, sheds light on his determination to revise his regime’s approach toward the #internet. 1/ pic.twitter.com/ngbgbePgNc
— NCRI-FAC (@iran_policy) June 17, 2023
Despite this fiscal crisis, Pezeshkian’s administration appears unwilling to confront other major drains on public finances. Much of the state’s income, although under tight sanctions, still comes from various sources such as oil revenues and taxes. The real issue is how these revenues are allocated. Instead of addressing domestic needs or investing in infrastructure and economic relief, vast sums are directed toward maintaining the regime’s security and funding its broader ambitions.
These include large-scale investments in missile development, regional influence through proxy groups, and maintaining the regime’s nuclear ambitions. However, these priorities remain untouched as Tehran opts to increase fuel prices instead, leaving the public to bear the brunt of the economic burden.
