Iran has introduced its first gasoline price adjustment in six years, but analysts argue the move remains too narrow and bureaucratically complex to address the country’s widening energy imbalance.
Under a new Cabinet resolution, fuel quotas at 15,000 rials ($0.13 at 113,000 rials/USD) and 30,000 rials ($0.27) are eliminated for newly registered domestic cars, imported vehicles and those in free-trade zones. These vehicles, along with motorists exceeding the 160-liter monthly quota or using station-issued cards, must now purchase gasoline at 50,000 rials per liter ($0.44), up from 30,000 rials previously.
For all other vehicles, the traditional quotas remain: 60 liters at 15,000 rials and 100 liters at 30,000 rials. Any consumption above these levels is priced at the new 50,000-rial tier. With premium gasoline expected to re-enter circulation in the coming months, the country is effectively moving toward a four-tier pricing system—an approach that many say reduces clarity and complicates market behavior.
Big Gaps
Economists stress that despite the nominal 67% increase in the open-market rate, the new price remains far below the real production cost. Senior officials say the cost of producing each liter of gasoline stands near 340,000 rials ($3.00), underscoring the scale of underpricing. Iran currently spends an estimated $120–150 billion annually on energy subsidies, among the highest levels relative to GDP anywhere in the world.
Because retail prices remain deeply disconnected from economic cost, experts doubt the adjustment will meaningfully reduce consumption.
Projections show daily demand could climb to 187 million liters by 2029, while the country’s best-case production outlook is 110–115 million liters. Even if output somehow reaches 140 million liters, Iran would still face a 50-million-liter daily deficit, potentially requiring $12 billion in annual fuel imports.
The design of the new policy has also raised questions. The decision, though initially circulated through partial information, has since been officially confirmed; however, key questions remain about why “newly registered” cars were targeted and how authorities plan to prevent quota-based rent opportunities for owners of older vehicles.
An interministerial committee may alter quotas seasonally, while the third rate—defined as 10% of refinery acquisition cost—will be recalculated quarterly. Without a transparent formula, the structure risks becoming more opaque over time.
Short-Term Fixes
Despite repeated promises to make households beneficiaries of efficiency gains, the first step of reform is once again imposed on consumers rather than state institutions. Analysts note that moderate and predictable price adjustments, accompanied by active monetary management, can limit inflationary impact. Yet Iran continues to adopt conservative, short-term measures.
With energy subsidies equal to roughly 37% of GDP, Iran’s structural energy imbalance cannot be resolved through incremental steps. Economists estimate $100 billion in investment is needed over five years to stabilize the sector—an outcome unlikely without deeper economic liberalization or renewed access to foreign capital, neither of which appears imminent under current policy direction.
