The policy of subsidizing gasoline is visibly not sustainable nor is it compatible with national interest as it has resulted, among other things, in encouraging border dwellers to smuggle fuel, said the managing director of Iran Fuel Conservation Company, a subsidiary of National Iranian Oil Company.
"Smuggling $13 million worth of diesel and gasoline every day is not the work of ordinary folks… and is being done in a rather systematic manner," Afkar News quoted Mohsen Delaviz as saying at the weekend.
The systemic illicit trade is lucrative to the extent that very few people in the border regions like Sistan-Baluchestan can resist the temptation and the government must not let this problem spread its roots “by taking proper measures, one of which is putting an end to the multi-billion dollar gasoline and diesel subsidies.”
Gasoline is sold for 10,000 rials (7 cents) a liter in Iran and smugglers sell it for 15 times the price in Pakistan and Afghanistan.
"The country pays $35 billion in fuel subsidies per annum," he noted, recalling that the same amount in China, whose population is 18 times bigger than Iran, is $37 billion.
Referring to the 70 million liters of gasoline produced in the country per day, he said oil refining capacity has improved noticeably in the past decade. Nonetheless, “demand will always outstrip production unless the people learn the merits of judicious consumption.”
The rapid increase in gasoline consumption in recent years (100 million liters per day) has compelled the government to import almost 30 million liters.
“Instead of training the public, officials always beg the people to be prudent and judicious in their energy use and this has never produced the desired results,” the senior oil official said.
Delaviz subscribes to the school that strongly believes in liberalizing gasoline prices to optimize consumption.
A Necessary Evil
Putting a permanent end to gasoline subsidies can and will optimize fuel consumption, he said, adding that a “managed float pricing regime will make people responsible for consumption management.” He did not elaborate.
Admitting the social consequences of higher fuel prices, namely rampant inflation, he said, "It is a necessary evil that must be allowed in the interest of a greater good. Charity (subsidies) is indeed a barrier to the progress and development of nations."
The Ministry of Cooperatives, Labor and Social Welfare has put the poverty line at $150 a month for three to five-member households.
The distribution of subsidized gasoline ended in 2015, yet in Sistan-Baluchestan, unlike other provinces, fuel in still rationed and people must have their own fuel cards to be able to buy gasoline or diesel.
Iran's gasoline is the fourth cheapest in the world after Venezuela and Kuwait, according to Global Petrol Prices. Bloomberg says it is the world's third cheapest.
The official complained that abundance of hydrocarbon resources has made Iranians oblivious to the fact that judicious consumption can help safeguard the wellbeing of future generations.
The amount of energy used in households, industrial and transportation sectors every day is the equivalent of burning almost 1.1 million, 900,000 and 870,000 barrels of crude oil respectively --- that is much higher than global standards.
Cheap energy prices have made Iran one of the most energy-intensive economies in the world.
IFCO provides energy management reform services in Iran. The company’s activities include implementation of energy regulation in buildings, replacement of proper ays of energy with fossil fuels as well as planning efficient fuel consumption management in the key transportation section.
