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Iraq Black Market Fuel Prices Increase as Supply Dwindles

The Iraqi economy is suffering from a shrinking supply of subsidized fuel and the rising price of fuel that is readily available on the black market.

At official fueling stations in Irbil, Iraq, gasoline is sold for less than 25 cents a liter. The government sets the price and subsidizes the costs. But the supply of this cheap fuel is decreasing. Stations are being forced to ration fuel. There is plenty of gasoline to be found on the streets in the unregulated black market. That gasoline currently costs one dollar a liter.

Taxi driver Hamza Karem says the gas shortage at official stations and the rising prices on the black market are very much related. “I'm wondering where they get the fuel on the streets. Sure, they bring it from the official station because they can sell it for more.”

Abdullah Malah runs this black market supply depot. He admits he has purchased fuel from refineries in Iraq that was intended for official fueling stations. “I paid 300 Iraqi dinar for one liter when the official price was 250 dinar. I paid for it and transported it back myself.”

Some economists say the growing corruption of the fuel subsidy program is just one reason why the government should let market forces determine the price of gasoline. Salahaddin University economics professor Mohammed Barwary says the fuel subsidy program is also costing the Iraqi government billions of dollars.

“For each liter of gasoline, the government pays $1.50 in subsidy. If we calculate 10 million liters multiplied by 1.5, it will be $15 million just for the Kurdistan Region. If we collected for all of Iraq it will be two to three billion dollars. We could use this money for development and other programs.”

Professor Barwary says, over time, the subsidies must be abolished. He believes the price of fuel must go up so that the energy industry can increase supply by building more refineries and fueling stations to meet demand.