Iran Raises Gasoline Prices for Heavy Users as Economic Pressures Mount

Iran has raised the price of gasoline for its heaviest users, state media reported Tuesday, introducing another increase as households grapple with mounting economic pressures and a weakening currency.

The latest adjustment is the second gasoline price increase since December and comes as the country faces heightened economic strain after months of war.

Gasoline prices are politically sensitive in Iran, where previous increases have triggered widespread public anger. A 2019 fuel-price increase sparked nationwide protests and a subsequent security crackdown that reportedly left more than 300 people dead.

New Price Targets Heavy Consumers

Under the new pricing system, motorists who purchase more than their monthly quota of 110 litres will now pay 100,000 rials around seven US cents per litre.

The new rate is double the price introduced for such purchases in December.

In announcing the measure, the Iranian government did not specifically refer to the country's war with the United States, instead citing the “current situation” and saying additional revenue generated by the increase would be directed to households.

Despite the adjustment, Iran continues to have some of the world's cheapest gasoline prices.

However, the increase comes at a time when Iranian consumers are already facing declining purchasing power, rising prices and a sharp depreciation of the national currency.

The US dollar was trading at approximately 2.22 million rials on Monday, according to the figures cited in reports.

15 Percent of Consumers Affected

Keramat Veis Karami, chief executive of Iran's state oil distribution company, said Monday that the new price would affect approximately 15 percent of gasoline consumers, according to the official IRNA news agency.

Karami also highlighted the growing gap between domestic gasoline consumption and production.

Iran's fuel consumption reached a record 145 million litres per day in August, while domestic production capacity stood at approximately 122 million litres per day, he said.

Although Iran is one of the world's major oil producers, its refining capacity remains limited, leaving the country dependent on fuel imports to meet part of its domestic demand.

Government Seeks to Curb Rising Consumption

Iranian authorities have increasingly focused on reducing fuel consumption as demand continues to outpace domestic production.

Experts have attributed the country's high gasoline consumption partly to an ageing vehicle fleet and inadequate public transportation infrastructure.

Higher prices could help discourage excessive fuel consumption and reduce pressure on the country's fuel supply system.

However, the policy also carries significant economic and political risks.

Economists warn that higher gasoline prices can feed into the wider cost of goods and services by increasing transportation and distribution expenses.

That could further accelerate inflation in an economy already under severe strain.

Inflation Adds to Household Pressure

Iran is already experiencing exceptionally high inflation, with the country's statistics centre putting the annual inflation rate at approximately 67 percent.

For households, another increase in fuel prices could translate into higher costs across the economy, particularly for transportation and goods that depend heavily on road freight.

The impact could be especially significant for lower-income households, despite the government's pledge to channel additional fuel revenue to families.

Fuel Prices Remain Politically Sensitive

Cheap gasoline has long been regarded by many Iranians as an important social entitlement, making attempts to raise prices particularly contentious.

The sensitivity surrounding fuel prices has a long history.

In 2019, a sudden increase in gasoline prices triggered demonstrations across Iran, which were met by a major security crackdown.

Earlier protests over fuel costs date back decades. In 1964, a gasoline price increase reportedly contributed to demonstrations by taxi drivers, prompting the government of the Shah to deploy military vehicles after striking drivers withdrew their services.

The latest increase therefore presents Iranian authorities with a delicate balancing act: reducing excessive fuel consumption and the cost of gasoline subsidies while avoiding further pressure on households already struggling with inflation and declining purchasing power.

For millions of Iranians, the change is another reminder of the economic pressures facing the country as the government attempts to manage fuel demand, limited refining capacity and an increasingly difficult economic environment.