Iran's annual gasoline demand has increased to a massive 1 billion liters, as 1 million-plus gas guzzlers are added to the already saturated domestic market per year, director of the National Iranian Oil Refining and Distribution Company said.
“The policy to send dilapidated cars to the scrapyard is no longer pursued due to the government’s budget deficit and this has exacerbated the appalling situation in the fuel sector,” Jalil Salari was also quoted as saying by IRNA.
To meet the ever-rising gasoline demand of fuel-inefficient vehicles, the National Iranian Oil Company must build a new refinery every year, which is impossible due to financial constraints, he added.
Salari noted that as long as gasoline demand is not managed efficiently, other strategies on the supply side such as importing the fuel, building new refineries or upgrading old facilities will not yield the desired result.
“Supply-oriented policies like increasing the number of crude processing firms require massive investment and cannot address gasoline shortage in the short run,” he said.
All refineries in Iran are producing at full capacity (110 million liters of gasoline/day) and output cannot rise any further over the next five years. Of this volume, 98% are burnt locally and the demand is on the rise incessantly.
“NIOC will need to import gasoline from next March, if efficient alternative plans like CNG conversion plans fail to move forward,” he said, adding that there is no quick fix for the looming fuel shortages because building new refineries or manufacturing fuel-efficient cars are either infeasible or take a long time.
The official said supply-side management approaches, including plans to import the fuel, should be replaced with demand-oriented management plans, such as getting rid of decrepit gas guzzlers that have outlived their usefulness.
Vicious Cycle
Salari said the more refineries are constructed, the more demand will be created and the vicious cycle will never end.
Focusing on the demand side, raising public awareness, promoting wise consumption patterns, taking advantage of advanced knowhow to manufacture fuel-efficient cars, upgrading urban transportation systems, accelerating CNG conversion schemes and increasing fuel prices are more likely to help prevent NIOC from importing gasoline.
According to the official, developing infrastructures to boost crude processing capacity is necessary, but NIOC has neither the funds nor the time as gasoline demand exceeds demand in the near future, because of which unsustainable supply-oriented management policies can do very little to ease the growing gasoline crisis.
Although NIOC has announced that it has no plans to import fuel to meet the rising domestic demand, the firm will have to make the bitter choice sooner or later.
Iran put an end to dependence on the costly import of gasoline in 2019. Gasoline imports reached 12 million liters per day in 2016 when Iranians burnt almost 74 million liters of gasoline daily. Import quotas dwindled to 3 ml/d by mid-2018 and were completely stopped in 2019.
Diesel Smuggling
The main reason behind diesel smuggling is the substantial gap between the fuel price in Iran and that of its neighboring nations, Salari said.
“Each liter of diesel can be sold 80 times higher in Iran’s neighboring states, which explains the lure of smugglers to engage in the illicit and dangerous fuel trafficking because of its high and rising profit.”
The official noted that diesel is sold at 2 cents per liter in Iran, but it costs 160 cents on the other side of the joint borders.
Among neighbors, Turkey, Iraq, Pakistan and Afghanistan are the main destinations of smuggled diesel.
“Gasoline smuggling can be traced, as it is supplied with smart fuel cards. Nonetheless, there is no such system for selling diesel and it is not clear how many liters of the fuel are sold on the other side of the borders every day,” he added.
There has never been reliable data on the volume of fuel smuggled out of Iran to neighboring countries in the past few decades, but estimates put the number in the region at 10 million liters per day.
Iran has the world's cheapest diesel (2 cents per liter) while the average international price for the same fuel is about 120 cents.
Domestic fuel prices are influenced by global prices, refining and distribution costs, demand, availability of resources and taxes.
