Accessibility links

Breaking News

Oil Rich Iran Faces Gas Rationing


Iran just raised its subsidized prices on gasoline and is introducing gas rationing. It may initially strike one as an odd move for a petroleum rich country like Iran. But, as VOA Correspondent Gary Thomas reports, just because a country has a lot of oil does not mean it also has a lot of gasoline.

Iran's move to gas rationing can be underscored by two seemingly contradictory statistics. Iran is the fourth largest oil exporter in the world. But it is also, according to the U.S. Energy Information Agency, the world's second largest gasoline importer on a net volume basis, buying about 40 percent of its refined gasoline from outside sources.

An economic geographer at Johns Hopkins University, Roger Stern, says Iran can produce oil for the world, but cannot refine it to meet the demands of its increasingly gas thirsty domestic market. "The reason that they are importing gasoline in the first place is because they lack the refining capacity to fully serve their domestic market, and that domestic market is rising at one of the fastest rates in the world. And it is rising fast because of the subsidized prices," he said.

On June 5, Iranians awoke to find the price of gas raised from nine cents a liter to 11 cents. On June 9, a new gas rationing plan is to go into effect in which drivers will be limited to 90 liters a month, and will use an electronic rationing card when they buy their fuel.

Gasoline is heavily subsidized in Iran. As a result of the subsidies, Iran enjoys some of the lowest priced gas in the world. In a country where the average per capita income is around $2,700 a year, cheap gas is seen as a critical benefit.

Roger Stern, who wrote a controversial National Academy of Science study on Iranian energy needs last year, says tampering with gas prices or supply is a minefield for Iranian politicians.

"It seems to be the one thing that the regime absolutely cannot do. And it is very much like Social Security in our country. People talk about reform, but even mentioning serious reform is politically pretty toxic. It could be the biggest domestic political issue aside from human rights and minority rights issues in the country," he said.

But analysts say the government had no choice but to act. Those subsidies cost the government an estimated $4 billion $5 billion a year last year. The analysts say that even with record high crude oil prices, the increased subsidies heighten the budget deficit and offset much of the revenue from oil exports.

Iranian gasoline consumption is rising by about 10 percent per year. Efforts to expand domestic refining capacity have been sluggish and unable to keep up with demand. So the government is trying to reduce consumption.

The streets of Tehran and other major cities are a motorist's nightmare. In the nearly omnipresent traffic jams, the rich, many of whom become wealthy from oil money, drive gas guzzling luxury cars. The poor, who are unable to afford new cars, must get around in pollution belching, energy inefficient vehicles living far beyond their normal life. The number of cars on the clogged roads continues to grow, further increasing fuel demand.

Majid Abbaspour, a professor at Sharif University and editor of the Tehran based International Journal of Environmental Science and Technology, says there has been what he terms "mixed reaction" to the rationing. He says there is heated debate about whether to allow those who are willing to pay a higher rate of about 50 cents a liter to buy more than the ration limit.

"Some people agree that if someone wants to take more than the rationed amount, they should buy the gasoline at the free market price, which is I think something like 4,000 rials (50 cents) or so. But some people in the parliament and in the government say they should go to a policy of just rationing only," he said.

Western analysts point out that this would be a dangerous step for the government because it would favor the rich who can afford to buy more gas, while leaving the poor to live within the ration limit. Ken Katzman, an Iran analyst for the nonpartisan Congressional Research Service, says the whole issue poses particular political dangers for President Mahmoud Ahmadinejad, who won the presidency two years ago campaigning as a populist.

"This is actually very regressive because it affects the poor more, because everybody has to pay more for gasoline. So the poor are more affected than wealthy people, and the poor are Ahmadinejad's constituency, after all. That is the segment that really carried him to his election in 2005. So I think it is definitely going to put a further dent in his political support," he said.

Some analysts believe the reliance on imported gasoline is Iran's Achilles' heel if the United States and its allies want to ratchet up the pressure on Iran over its nuclear program.